How will the market value of a call option change in each of the following circumstances?

Question

A The price of the underlying stock decreases
B The time until the option expire increases

Answer 1

A) Now if the underlying stock decreases and the call option is still in the money. It means that your profit from exercising the option would be smaller. Thus the options would become less value.

B) If the time until the option expire actually increase, it means that there is a high probability that the option can be within the money and vice versa of course. But it gives holders more freedom and less stress thus such an option would increase in value.

Hope the information helps!

Answer 2

If the price of the underling stock decreases a small amount the amount the option will decrease in price is (the amount the stock price changed) x (the delta of the option).

The time until a given option expires cannot increase since time only moves in one direction.

If you mean "the time until expiry decreases" the answer is the theta of the option per day.

If you mean "what will be the difference in price of two call options on the same underlying with the same strike price and different expiration dates" the answer is the longer option will have the higher price.

You should also be aware that other factors have an impact on the price of a call option, including a change in "implied volatility" and a change in the risk free interest rate.

If you do not know that the delta of an option, or the theta of an option, is you can get if from an options calculator such as the one at

http://www.cboe.com/framed/IVolframed.aspx?content=http%3a%2f%2fcboe.ivolatility.com%2fcalc%2findex.j%3fcontract%3d39600F1C-F793-487D-9FED-12D2EC12F121§ionName=SEC_TRADING_TOOLS&title=CBOE%20-%20IVolatility%20Services