To the option holder, put options are worth ______ when the exercise price is higher; call options are worth ______ when the exercise price is higher.
A) more; more
B) more; less
C) less; more
D) less; less
E) It doesn't matter-they are too risky to be included in a reasonable person's portfolio.

Question

Quizplus · Accepted Answer

Put options become more valuable as the exercise price increases because the option to sell the underlying asset at a higher price becomes more attractive. Conversely, call options become less valuable as the exercise price increases because the cost to buy the underlying asset is higher, making the option less attractive.

To the Option Holder, Put Options Are Worth ______ When