Which of the following statements is true?
A) For both calls and puts an increase in the exercise price will cause an increase in the option price.
B) For both calls and puts an increase in the time to expiration will cause an increase in the option price.
C) For calls, but not for puts, an increase in the time to expiration will cause an increase in the option price.
D) For puts, but not for calls, an increase in the time to expiration will cause an increase in the option price.

Question

Quizplus · Accepted Answer

An increase in the time to expiration generally increases the option price for both calls and puts because it gives the underlying asset more time to move in a favorable direction, increasing the chance of the option being in the money at expiration.

Which of the Following Statements Is True