Which of the following properties of a put option's beta is most valid?
A) The beta of a put increases as the stock price increases.
B) The beta of a put decreases if the beta of the stock increases.
C) The beta of a put is bounded between $( - 1 , + 1 )$ .
D) The beta is always positive.

Question

Quizplus · Accepted Answer

The beta of a put option is related to the beta of the underlying stock, but in an inverse manner. If the beta of the stock increases, indicating that the stock's returns are more volatile compared to the market, the put option, which gains in value when the stock price decreases, would have its beta decrease as it becomes a more attractive hedge or protective instrument against the stock's volatility.

Which of the Following Properties of a Put Option's Beta (−1,+1)( - 1 , + 1 )(−1,+1)

Which of the Following Properties of a Put Option's Beta $( - 1 , + 1 )$