The premium on a stock index call would be expected to increase as the
A) market becomes more volatile.
B) option life nears expiration.
C) index price falls further below the strike price.
D) underlying securities stabilize in value.

Question

Quizplus · Accepted Answer

The premium on a stock index call option is expected to increase as the market becomes more volatile because higher volatility increases the probability of the option ending in the money, thus making it more valuable.

The Premium on a Stock Index Call Would Be Expected