The premium on an existing call option should ____ when there is a reduction in the volatility of the underlying stock.

Question

Quizplus · Accepted Answer

The premium on a call option decreases when there is a reduction in the volatility of the underlying stock because lower volatility means there is a smaller chance of the stock price moving significantly, which in turn reduces the potential benefit of holding the option.

The Premium on an Existing Call Option Should ____ When