Final answer:
The price of a stock call option is positively correlated with the stock price and inversely correlated with the strike price, meaning the option's value increases with the stock price and decreases with a higher strike price.
Step-by-step explanation:
The price of a stock call option is positively correlated with the stock price and inversely correlated with the strike price. This means that, typically, as the stock price increases, the value of the call option also increases, because the call option becomes more valuable when the underlying stock trades above the strike price.
Conversely, as the strike price increases, the value of the call option tends to decrease because it's more expensive for the option holder to purchase the stock at the higher strike price, making the option less attractive.
Options pricing can be quite complex, involving various factors such as the underlying stock's volatility, time to expiration, and the risk-free interest rate, among others. These are all components of the Black-Scholes model, a widely-used mathematical model for pricing options contracts.
However, the relationship with the stock and strike prices are fundamental to understanding how options behave in relation to the market movements.