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When does the convexity of call option turn negative?

User Raviraj
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Final answer:

The convexity of a call option usually remains positive given the accelerating rate at which call options increase in value relative to the underlying asset. Negative convexity is not a typical financial concept but rather relates to optics, describing outward-curved mirrors.

Step-by-step explanation:

The convexity of a call option refers to the curvature of the price of the option relative to the changes in the price of the underlying asset. It typically does not turn negative; convexity in the context of options usually remains positive because the value of a call option continues to rise as the price of the underlying asset increases, but at an accelerating rate due to the nonlinear payoff profile of options. The negative convexity is a concept that is more relevant to the field of optics, where it describes a mirror that curves outward, causing the focal point to be behind the mirror.

User Jamessan
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