The value of both call and put options increases as the variability of the stock price increases.

Question

Quizplus · Accepted Answer

Both call and put options derive their value partly from the volatility of the underlying stock price. If the stock price is more volatile, there is a greater chance of the stock price moving in favor of the option holder, resulting in a higher potential profit. Therefore, as the variability of the stock price increases, the value of both call and put options increases.

The Value of Both Call and Put Options Increases as the Variability