Considering a put option; if the price of the underlying asset increases:
A) the value of the put option also increases.
B) the intrinsic value of the option increases.
C) the value of the option decreases.
D) the time value of the option decreases.

Question

Quizplus · Accepted Answer

A put option gives the holder the right, but not the obligation, to sell the underlying asset at a specific price (strike price) before a certain expiration date. Therefore, if the price of the underlying asset increases, it becomes less likely that the holder will exercise the option and sell the asset at a lower price than the current market price. As a result, the value of the put option, which reflects the probability of exercise, decreases. The intrinsic value of the option may or may not change depending on the difference between the strike price and the underlying asset price. The time value of the option may also change depending on other factors.

Considering a Put Option; If the Price of the Underlying