Stocks that have more volatile price changes have more valuable call options because call holders:
A)Capture upside potential without downside risk
B)Realize that volatility decreases the present value of the exercise price
C)Have too little variability in the exercise price
D)Have transferred all risk to put holders

Question

Quizplus · Accepted Answer

Call holders benefit from being able to capture the upside potential of the underlying stock without having to bear any downside risk. When the underlying stock has more volatile price changes, there is a higher likelihood of significant movements in the stock price, which means that there is a greater likelihood of the call option being in-the-money at expiration. This increases the value of the call option and makes it more valuable to call holders.

Stocks That Have More Volatile Price Changes Have More Valuable