Which of the following statements are correct concerning option values? I.The value of a call increases as the price of the underlying share increases.
II)The value of a call decreases as the exercise price increases.
III)The value of a put increases as the price of the underlying share increases.
IV)The value of a put decreases as the exercise price increases.

Question

Quizplus · Accepted Answer

Statement I is correct as an increase in stock price increases the potential profit of the call option.
Statement II is also correct as an increase in exercise price decreases the chance of the option being profitable, leading to a decrease in value.
Statement III is incorrect as an increase in stock price decreases the potential profit of the put option, leading to a decrease in value.
Statement IV is correct as an increase in exercise price increases the chance of the option being profitable, leading to a decrease in value.

Which of the Following Statements Are Correct Concerning Option Values