The correct option is D x2 - y2 = - l2
Let C(h, k) be the centre of the circle
Circle touches x-axis ⇒ radius = |k|
Equation of the circle with centre (h, k) and radius |k| is
(x−h)2+(y−k)2=k2 ⇒ x2 + y2−2hx−2ky+h2 = 0
Length of the intercept on y-axis is 2l ⇒ 2√k2−h2 = 2l ⇒k2−h2=l2
Locus of (h, k) is y2 - x2 = l2