The two factors that affect both call option values and put option values in the same direction are:
A) higher dividends and greater volatility.
B) higher dividends and higher interest rates.
C) higher asset price, and higher exercise price.
D) greater volatility and longer time to expiration.
E) higher interest rates and longer time to expiration.

Question

Quizplus · Accepted Answer

Greater volatility and longer time to expiration both increase the value of call and put options. Higher volatility increases the potential for the underlying asset to move in a favorable direction for the option holder, while a longer time to expiration gives the option more time to become profitable.

The Two Factors That Affect Both Call Option Values and Put