Stocks that have more volatile price changes have more valuable call options because call holders:
A) capture upside potential without additional downside risk.
B) realize that volatility decreases the present value of the exercise price.
C) have too little variability in the exercise price.
D) have transferred all risk to put holders.

Question

Quizplus · Accepted Answer

Call holders benefit from price increases in the underlying stock without being exposed to additional downside risk. Stock with more volatile price changes have higher potential for large price swings, making call options more valuable as they allow call holders to capture these large swings without taking on additional risk.

Stocks That Have More Volatile Price Changes Have More Valuable