How Does an Increase in Interest Rates Generally Affect the Price of a Call Option?

An increase in interest rates generally leads to an increase in the price of a call option. This is primarily due to the cost of carry component in option pricing models.

Higher interest rates reduce the present value of the strike price that the buyer would pay upon exercise, making the option more valuable. Conversely, higher rates make holding the underlying asset more expensive for the option writer, which also contributes to a higher call option premium.