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 a negative direction. If the beta of the stock increases, indicating that the stock's returns are more volatile compared to the market, the beta of the put option would decrease as the put option would become less risky in comparison (since it offers a hedge against a decline in the stock price). Options, including puts, can have negative betas because they can move in the opposite direction of the stock market.

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 $( - 1 , + 1 )$