bbtomato

okay i see what u are saying.

lets go back to put call parity to get value of call option.

C = P + S - X/ (1+r)

If interest rates go up, last component goes down and C goes up.

But with interest rates going up, S the spot price comes down(intrinsic characteristic of the underlying in this case). So, C goes down.

since these are contradicting effects, look like we cannot predict the value of embedded call option with interest rate movements then.