Investor A bought a call option and Investor B bought a put option.All else equal if the underlying stock price volatility increases the value of Investor A's position will ______ and the value of Investor B's position will _______.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

Both call and put options increase in value with higher volatility because the potential for larger price movements increases the likelihood of the options being profitable.

Investor a Bought a Call Option and Investor B Bought