Consider an American call option on a stock. How does the option price change when: (i) The volatility increases. (ii) The maturity increases. (iii) The strike increases. Which (if any) of the three answers above changes when considering a European option?

i) When the volatility increases, the price of call option also increases. This shows that the price of option and volatility is directly related. There is no change in this relationship even when it comes to European call option.

ii) In case of American call option, as the maturity increases, the price of option also increases. But in case of european call option , As the time to maturity increases, the effect on option price is undefined . So the relationship between them cannot be determined in casee of European call option.

iii) As the strike price increases, the price of call option decreases, making it more difficult for the buyer to be in the money. Therefore , there is an inverse relationship between strike price and price of the call option. This relationship remains the same in case of both American call and European call option.