What overall effect does exercising a call option have on the stockholder?

Exercising a call option has the effect of converting the option into the underlying stock, which typically means that the stockholder acquires shares at a predetermined strike price. When they exercise the call, they are effectively exchanging the option for equity in the company, which may lead to ownership of more shares or an increase in their position size.

By exercising the call option, the holder is not just cashing out but instead solidifying their position in the underlying asset. This aligns with the concept that exercising a call option allows the holder to buy shares at a set price, potentially benefiting from any upside in the stock’s value. Thus, the correct choice illustrates that the action of exercising the option converts it into stock, thereby enhancing their position in that asset.

The other choices do not correctly capture the essence of what happens when a call option is exercised. For instance, decreasing total asset value typically does not occur, as the exercise is aimed at gaining equity, not liquidating it. Holding onto a stock longer is not necessarily a direct result of exercising a call option; it is more about assuming ownership, not a time commitment. Lastly, exercising the option does not inherently increase obligations to the option seller; rather, it completes the transaction under the