The value of a call option is positively related to:
A) Underlying stock price.
B) Time to expiration
C) Exercise price.
D) a and b
E) b and c

Question

Quizplus · Accepted Answer

The value of a call option is positively related to the underlying stock price and time to expiration. This is because as the stock price increases, the value of the call option increases since it gives the holder the right to buy the stock at a lower exercise price. Similarly, as time to expiration increases, the potential for the stock price to increase also increases, which increases the value of the call option. Exercise price, on the other hand, has a negative relationship with the value of a call option, as a higher exercise price means the option is more out-of-the-money and therefore less valuable.

The Value of a Call Option Is Positively Related To