All else equal, if an option's strike price increases, then the
A)value of a put option increases and that of a call option decreases.
B)value of a put option decreases and that of a call option increases.
C)value of both a put option and a call option increase.
D)value of both a put option and a call option decrease.

Question

Quizplus · Accepted Answer

The value of a put option increases with an increase in the strike price because the option becomes more valuable as the right to sell the underlying asset at a higher price becomes more attractive. Conversely, the value of a call option decreases because the right to buy the asset at a higher price becomes less attractive.

All Else Equal, If an Option's Strike Price Increases, Then