The intrinsic value of a long call option:
A) Falls and rises with the price of the underlying c
B) Rises if the price of the underlying commodity fal
C) Depends solely on the volatility of the price of t
D) Becomes negative if the market price of the underl

Question

Quizplus · Accepted Answer

The intrinsic value of a long call option is the difference between the strike price and the current market price of the underlying asset. Therefore, as the price of the underlying asset rises, the intrinsic value of the option also rises. Conversely, if the price of the underlying asset falls, the intrinsic value of the option falls as well. The volatility of the underlying asset may affect the overall value of the option, but it does not determine the intrinsic value of the option. Additionally, the intrinsic value of a long call option cannot become negative.

The Intrinsic Value of a Long Call Option