I Hold a Long Position in a Call Option on IBM

question 16

Multiple Choice

I hold a long position in a call option on IBM stock.If the price of IBM goes down and its volatility goes up,then the value of my call option

• A)Increases.
• B)Decreases.
• C)Is unaffected.
• D)May increase,decrease,or stay the same.

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Definitions:

Substituted Contract

An agreement that replaces an existing contract, typically with the consent of all parties involved, establishing new terms and obligations.

Novation

The act of replacing one party in a contract with another party, or altering the terms of a contract, with all parties' consent, resulting in a new agreement.

Material Breach

A significant violation of a contract that permits the other party to either compel performance, seek remedies for damages, or terminate the agreement.

Nonbreaching Party

The party in a contract who has not violated the agreement and may be entitled to legal remedies.