Which of the following statements is FALSE?
A)For a call written on a stock with positive beta,the beta of the call always exceeds the beta of the stock.
B)The beta of a put option written on a negative beta stock is always negative.
C)As the stock price changes,the beta of an option will change,with its magnitude falling as the option goes in-the-money.
D)A put option is a hedge,so its price goes up when the stock price goes down.

Question

Quizplus · Accepted Answer

The statement that the beta of a put option written on a negative beta stock is always negative is false. The beta of the put option will actually be positive, as the price of the put option will increase as the price of the underlying stock decreases. Therefore, the put option provides a form of insurance against losses in the stock, and its beta will be positive.

Which of the Following Statements Is FALSE