Call options on XYZ Corporation's common stock trade in the market.Which statement regarding XYZ Corporation's options is true,other things held constant?
A)The price of these call options is likely to rise if XYZ's stock price rises.
B)The higher the strike price on XYZ's options, the higher the option's price will be.
C)Assuming the same strike price, an XYZ call option that expires in 1 month will sell at a higher price than one that expires in 3 months.
D)If XYZ's stock price stabilizes (becomes less volatile), then the price of its options will increase.

Question

Quizplus · Accepted Answer

Call options give the holder the right to buy the underlying stock at a specified price (strike price) before or on the expiration date. If the stock price increases, the holder of the call option can purchase the stock at the lower strike price, making the option more valuable. Therefore, as XYZ's stock price rises, the price of its call options is likely to rise as well.

Call Options on XYZ Corporation's Common Stock Trade in the Market.Which