When Does a Change in the Value of a Call

question 76

Multiple Choice

When does a change in the value of a call option come closest to matching the change in the price of the stock?

• A) When the stock is priced far above the exercise price.
• B) When the stock is priced far below the exercise price.
• C) When the stock is priced near zero.
• D) Changes in call value always come close to matching changes in stock price.

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Definitions:

Profit

The profit achieved when the income from business operations surpasses all associated expenses, costs, and taxes.

MC < MR

A condition in which the marginal cost of producing an additional item is less than the marginal revenue earned from selling it, suggesting that increasing production is profitable.

Profit

The financial gain obtained when the revenue from business activities exceeds the expenses, costs, and taxes.

License Fee

A charge paid for permission to use intellectual property, enter a market, or perform certain activities within a regulatory framework.