The value of an option ________ with the volatility of the underlying stock.
A) increases
B) decreases
C) unchanged
D) cannot say for sure

Question

Quizplus · Accepted Answer

The value of an option increases with the volatility of the underlying stock. This is because higher volatility increases the likelihood that the stock price will move significantly, which increases the potential profit for the option holder.

The Value of an Option ________ with the Volatility of the Underlying