Which of the following factors increases the price of a put option?
A)Higher asset price, higher strike price, increased volatility, increased dividends
B)Higher strike price, longer time to expiration, increased volatility, increased dividends
C)Higher strike price, longer time to expiration, increased volatility, increased interest rates
D)Longer time to expiration, increased volatility, decreasing interest rates, decreasing dividends

Question

Quizplus · Accepted Answer

When the strike price is higher, it gives the option holder the right to sell the underlying asset at a higher price, which increases the value of the put option. Longer time to expiration also increases the value of the option as it allows more time for the underlying asset to decline in value. Increased volatility increases the likelihood of the underlying asset declining in value, making the put option more valuable. Increased dividends have the opposite effect, reducing the value of the put option.

Which of the Following Factors Increases the Price of a Put