________ on the underlying asset tend to decrease the price of a call option because the cash payments make it more attractive to hold the underlying asset than to hold the option. For put options, ________ on the underlying asset tend to increase the price.

Question

Quizplus · Accepted Answer

Cash payments, such as dividends, on the underlying asset decrease the price of a call option because they make holding the asset more attractive due to the additional income. For put options, cash payments increase the price because the underlying asset's value decreases with each cash payment, making the put option more valuable.

________ on the Underlying Asset Tend to Decrease the Price