The writer of a put option hopes that the price of the underlying stock will rise because
A) the option is more likely to be exercised.
B) the option is less likely to be exercised.
C) the buyer of the put will have to purchase the stock at a higher price.
D) the value of the put option will increase in the secondary market.

Question

Quizplus · Accepted Answer

The writer (seller) of a put option hopes the price of the underlying stock will rise, making the option less likely to be exercised, as the option gives the holder the right to sell the stock at a predetermined price. If the stock price rises above this price, the option becomes less attractive to exercise.

The Writer of a Put Option Hopes That the Price