The value of a stock put option is positively related to
A)the time to expiration.
B)the striking price.
C)the stock price.
D)the time to expiration and the striking price.

Question

Quizplus · Accepted Answer

The value of a stock put option is influenced by both the time to expiration and the striking price. As the time to expiration increases, the value of the put option also increases, which results from the increased likelihood of a decline in the stock price. Similarly, as the striking price of the option decreases, or moves closer to the current stock price, the value of the put option increases, because the option becomes more valuable as the likelihood of the stock price falling below the striking price increases. Therefore, the combination of these two factors influences the value of the put option.

The Value of a Stock Put Option Is Positively Related