The ____, the lower the premium on a put option, other things being equal.

Question

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A put option gives the holder the right to sell the underlying security at a specified exercise price. The premium on a put option is the price that the holder pays for acquiring this right. The premium is lower when the existing price of the security is higher relative to the exercise price because the put option is less valuable in this scenario. If the existing price is already below the exercise price, there is more likelihood that the option will be exercised and the holder will make a profit. Therefore, the premium on a put option will be higher. The variability of the security's market value, as well as the maturity of the option, can affect the premium, but they are not as directly related to the price of the underlying security as the existing price's relation to the exercise price.

The ____, the Lower the Premium on a Put Option