Which one of the following statements is correct concerning option values?
A) The value of a call increases as the time to expiration decreases.
B) The value of a call increases when the strike price increases.
C) The value of a put is greater if it is a European put rather than an American put.
D) The value of a March 30 put on a stock tends to move inversely to the value of the March 30 call on the same stock.
E) The value of a put increases as the strike price decreases.

Question

Quizplus · Accepted Answer

The value of a put option tends to move inversely to the value of a call option on the same stock with the same strike price and expiration date because as the stock price decreases, the put option becomes more valuable while the call option becomes less valuable, and vice versa.

Which One of the Following Statements Is Correct Concerning Option