A writer of a call option will want the value of the underlying asset to ________, and a buyer of a put option will want the value of the underlying asset to ________.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase

Question

Quizplus · Accepted Answer

A writer of a call option will want the value of the underlying asset to decrease as it will reduce the likelihood of the buyer of the call option exercising their right to buy the asset at an agreed-upon price (strike price). Conversely, a buyer of a put option will want the value of the underlying asset to decrease as it increases the likelihood of the put option being exercised and the buyer making a profit by selling the asset at a price greater than the market price.

A Writer of a Call Option Will Want the Value