Which of the following will increase the premium on a call option?
A)It is out of money
B)It will expire in 72 hour
C)It is on a very volatile stock
D)It is covered by a put

Question

Quizplus · Accepted Answer

A call option on a volatile stock is more likely to experience price fluctuations, making it riskier and therefore leading to an increase in premium. Options that are out of the money (A) have no intrinsic value and will have a lower premium, options that are close to expiration (B) have less time value and will also have a lower premium, and options that are covered by a put (D) have limited upside potential and will have a lower premium.

Which of the Following Will Increase the Premium on a Call