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 exceed 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, the opportunity for the stock price to exceed the exercise price also increases, making the call option more valuable. The other options listed (A, C, and D) are not accurate explanations for why the value of a call option increases with time to expiration.

The Value of a Call Option Increases as the Time