- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 8. Factors that Affect the Value of an Option
CFA Practice Question
The higher the exercise price ______.
A. the higher the call price
B. the lower the call price
C. the higher the stock price
User Contributed Comments 7
| User | Comment |
|---|---|
| spowers | Can someone explain? |
| samhoklee | higher exercise price, decreases deviation from stock price, thus demand lower option premium. |
| moose1969 | simpe example would be: A DEC $35 call will be cheaper than a DEC $10 call if the stock is trading @ $20. |
| mrvega | Exercise price is relative to the underlying stock price. |
| chuong | Intrinsic value of call option: C = max (0, S-X) therefore the higher X, the lower C |
| julamo | Let's just keep it simple: By definition, the "exercise price", or "strike price" for a CALL option is the price at which the underlying security can be purchased. If that price is high, the option becomes less attractive and loses in value... That's it |
| Lucho | The buyer is willing to pay a lower price |