Buyers of put options anticipate the value of the underlying asset will __________, and sellers of call options anticipate the value of the underlying asset will ________.
A) increase; increase
B) decrease; increase
C) increase; decrease
D) decrease; decrease
E) Cannot tell without further information

Question

Quizplus · Accepted Answer

Buyers of put options anticipate a decrease in the value of the underlying asset because a put option gives the holder the right to sell the asset at a predetermined price, which becomes profitable if the asset's value falls below this price. Sellers of call options anticipate a decrease in the value of the underlying asset because a call option gives the buyer the right to buy the asset at a predetermined price, which becomes unprofitable for the seller if the asset's value decreases.

Buyers of Put Options Anticipate the Value of the Underlying