What Happens to the Value of Call and Put Options

question 94

Multiple Choice

What happens to the value of call and put options, with everything else constant, as the expiration date gets closer?

• A) Call option will be worth more, put options will be worth less.
• B) Call option will be worth less, put options will be worth more.
• C) Both call and put options will be worth more.
• D) Both call and put options will be worth less.

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Definitions:

Least-cost Output

The level of production at which a firm can produce a specified quantity of output at the lowest possible cost.

Monopolistic Competition

A market structure where many companies sell products that are similar but not identical, leading to competition based on factors other than prices, such as product differentiation.

Product Variety

Refers to the assortment of different goods and services that a company offers to meet the varied preferences of consumers.

Monopolistically Competitive

Describes a market structure where many firms sell products that are similar but not identical, allowing them room for differentiation and some degree of price control.