The value of a call option increases as the time to expiration increases because:
A) the exercise price continually decreases.
B) the opportunity increases for the stock price to surpass the exercise price.
C) the dividends accumulate while waiting to be paid.
D)the option can be repeatedly exercised.

Question

Quizplus · Accepted Answer

As the time to expiration increases, there is more time for the underlying stock price to move in the direction favoring the call option holder, meaning there is a greater opportunity for the stock price to exceed the exercise price and produce a profit for the option holder. This potential for profit makes the option more valuable, thus increasing its price.

The Value of a Call Option Increases as the Time