Which of the following will result from a decrease in an option's strike price?
I. increase in call option price
II. decrease in call option price
III. increase in put option price
IV. decrease in put option price
A)I only
B)I and III only
C)I and IV only
D)II and III only
E)II and IV only

Question

Quizplus · Accepted Answer

Decreasing an option's strike price makes a call option more valuable (since it's cheaper to buy the stock at the lower strike price), hence increasing its price. Conversely, it makes a put option less valuable (since selling the stock at the lower strike price is less attractive), hence decreasing its price.

Which of the Following Will Result from a Decrease in an Option's