Considering a call option, if the price of the underlying asset decreases:
A) the intrinsic value of the option decreases if it is above zero.
B) the intrinsic value of the option increases if it is above zero.
C) the strike price decreases.
D) the value of the option increases.

Question

Quizplus · Accepted Answer

The intrinsic value of a call option is the difference between the current market price of the underlying asset and the strike price. If the price of the underlying asset decreases, the difference between the two prices reduces, resulting in a decrease in the intrinsic value of the option (only if it is above zero).

Considering a Call Option, If the Price of the Underlying