The value of an otherwise identical call option is ________ if the strike price the holder must pay to buy the stock is ________.
A)higher,higher
B)lower,lower
C)higher,lower
D)unchanged,lower
E)unchanged,higher

Question

Quizplus · Accepted Answer

The value of a call option is higher when the strike price is lower. This is because a lower strike price gives the holder the right to buy the stock at a cheaper price, which would result in a higher profit if the stock price increases. Conversely, a higher strike price reduces the likelihood of the option being profitable, which reduces its value. Therefore, if the strike price is lower, the call option will have a higher value.

The Value of an Otherwise Identical Call Option Is ________