Which of the following will increase in price as the value of the underlying asset decreases in price,from the option holder's perspective?

Question

Quizplus · Accepted Answer

A put option gives the holder the right, but not the obligation, to sell the underlying asset at a predetermined price (strike price) at any time before expiration. As the value of the underlying asset decreases, the value of the put option increases, as it becomes more valuable to sell the asset at the higher strike price. Therefore, the price of a put option will increase as the value of the underlying asset decreases.

Which of the Following Will Increase in Price as the Value