What impact does each of the following call option parameters have on the value of a call option?
(1) Current stock price
(2) Strike price
(3) Option’s term to maturity
(4) Risk-free rare
(5) Variability of the stock price
Assume that you have just been hired as a financial analyst by Triple Trice Inc., a mid-sized California company that specializes in creating high-fashion clothing. Because no one at Triple Trice is familiar with the basics of financial options, you have been asked to prepare a brief report that the firm’s executives can use to gain at least a cursory understanding of the topic.