The value of a listed call option on a stock is lower when:
I. The exercise price is higher.
II. The contract approaches maturity.
III. The stock decreases in value.
IV. A stock split occurs.
A) II, III, and IV only
B) I, III, and IV only
C) I, II, and III only
D) I, II, III, and IV

Question

Quizplus · Accepted Answer

I. A higher exercise price makes it less likely that the option will be in the money, thus decreasing its value.II. As the contract approaches maturity, there's less time for the stock to move into a favorable position, decreasing the option's value.III. If the stock decreases in value, a call option (right to buy at a set price) becomes less valuable if the stock is below the exercise price.

The Value of a Listed Call Option on a Stock