Which of the following correctly identifies the impact of these changes on the put option of Tele-Tech Com?
A) Both changes cause the price of the put option to decrease.
B) Both changes cause the price of the put option to increase.
C) The volatility normally will have a positive effect on the price of the put option, but the lower price of the stock will cause the price of the put option to increase.
D) The volatility normally will have a negative effect on the price of the put option while the lower price of the stock will cause the price of the put option to decrease.
E) Volatility has no direct effect on the price of the put option while the lower price of the stock will cause the price of the put option to decrease.

Question

Quizplus · Accepted Answer

Increased volatility generally increases the value of options, including puts, as it implies a higher chance of the option ending in-the-money. A lower stock price increases the value of a put option, as it is more likely to be profitable.

Which of the Following Correctly Identifies the Impact of These