The dollar change in the value of a stock call option is always
A)lower than the dollar change in the value of the stock.
B)higher than the dollar change in the value of the stock.
C)negatively correlated with the change in the value of the stock.
D)higher than the dollar change in the value of the stock and negatively correlated with the change in the value of the stock.

Question

Quizplus · Accepted Answer

The dollar change in the value of a stock call option is typically lower than the dollar change in the value of the stock itself due to the concept of delta, which measures the rate of change of the option price relative to a one-unit change in the price of the underlying asset. Delta values range from 0 to 1 for call options, meaning the option's value changes less than the stock's value.

The Dollar Change in the Value of a Stock Call