Asked by Joleecia Gresham on Jul 21, 2024
Verified
Other things equal, the price of a stock call option is negatively correlated with which of the following factors?
A) The stock price
B) The time to expiration
C) The stock volatility
D) The exercise price
E) The stock price, time to expiration, and stock volatility
Stock Volatility
This is a measure of the fluctuation in the price of a stock over time, indicating the security's stability or instability.
Time To Expiration
The period remaining until the expiration date of a financial instrument, such as an option or futures contract.
Exercise Price
The price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset or security.
- Acquire an understanding of the negative or positive interrelations between the cost of options and key factors including stock prices, time until expiration, the volatility of stocks, and the strike price.
Verified Answer
AL
Autumn LovelandJul 22, 2024
Final Answer :
D
Explanation :
The price of a stock call option is negatively correlated with the exercise price. As the exercise price increases, all else being equal, the value of the call option decreases because the option becomes less likely to finish in the money.
Learning Objectives
- Acquire an understanding of the negative or positive interrelations between the cost of options and key factors including stock prices, time until expiration, the volatility of stocks, and the strike price.