All else constant, which one of the following situations will produce the highest call price given a strike price of $25?
A)$30 stock price; 40 days to option expiration
B)$30 stock price; 60 days to option expiration
C)$35 stock price; 40 days to option expiration
D)$35 stock price; 60 days to option expiration
E)Insufficient information is provided to answer this question.

Question

Quizplus · Accepted Answer

As the stock price increases, the call option becomes more valuable, so C and D are more likely to have a higher call price than A and B. In addition, as the option expiration date gets closer, the option becomes more valuable because there is less time for the stock price to move in the opposite direction, so D is more likely to have a higher call price than C. Therefore, choice D is the best choice as it has both a higher stock price and a closer expiration date.

All Else Constant, Which One of the Following Situations Will