Which of the following affect the value of puts and calls written on shares of common stock?
I. price volatility of the underlying stock
II. current market price of the underlying stock
III. length of time until the option expiration date
IV. current market interest rate
A) I and II only
B) I, II and III only
C) II, III and IV only
D) I, II, III and IV

Question

Quizplus · Accepted Answer

All four factors listed affect the value of puts and calls. Price volatility and the current market price directly impact the intrinsic and extrinsic value of options. The time until expiration affects the time value component of an option's price. Current market interest rates influence the cost of carry and thereby the pricing of options.

Which of the Following Affect the Value of Puts and Calls