If a share price increases, the price of a put option on the share will ________ and the price of a call option on the share will ________.
A)decrease; decrease
B)decrease; increase
C)increase; decrease
D)increase; increase

Question

Quizplus · Accepted Answer

When the share price increases, the price of a put option decreases as the probability of the share price falling below the strike price decreases. On the other hand, the price of a call option increases as the probability of the share price exceeding the strike price increases. Therefore, the correct answer is (B): decrease for a put option, increase for a call option.

If a Share Price Increases, the Price of a Put