Asked by VALERIA BARDALES on Jun 15, 2024
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Warner Motors' stock is trading at $20 a share.Call options that expire in three months with a strike price of $20 sell for $1.50.What will happen if the stock price increases 10%,to $22 a share?
A) The price of the call option will increase by $2.
B) The price of the call option will increase by less than $2, and the percentage increase in price will be less than 10%.
C) The price of the call option will increase by less than $2, but the percentage increase in price will be more than 10%.
D) The price of the call option will increase by more than $2, but the percentage increase in price will be less than 10%.
Strike Price
The specified price at which the holder of an option can buy (call option) or sell (put option) the underlying asset or security until the expiration date.
Call Option
A financial contract that gives the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specified price within a specific time period.
Stock Price
The current market price at which a share of a company's stock can be bought or sold.
- Evaluate how shifts in stock price impact the pricing of call and put options.
Verified Answer
Learning Objectives
- Evaluate how shifts in stock price impact the pricing of call and put options.
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