If the stock price decreases, the price of a put option on that stock __________, and that of a call option __________.
A)decreases; increases
B)decreases; decreases
C)increases; decreases
D)increases; increases

Question

Quizplus · Accepted Answer

The price of a put option increases when the stock price decreases because the option becomes more valuable as it allows the holder to sell the stock at a higher price than the market price. Conversely, the price of a call option decreases because the option becomes less valuable as the opportunity to buy the stock at a lower price diminishes.

If the Stock Price Decreases, the Price of a Put