When market prices are high, the buyer is paying a significant amount for the intrinsic value of a call option which could be completely lost if prices fall prior to expiry so the option becomes less attractive at higher prices.

Question

Quizplus · Accepted Answer

The intrinsic value of a call option is the difference between the market price and the strike price. When market prices are high, the potential for further gains is reduced, making the option less attractive as the risk of losing the premium paid increases if prices fall.

When Market Prices Are High, the Buyer Is Paying a Significant