An increase in the price of the underlying stock will __________ the price of a put option because put option delta is always __________.
A) increase; negative
B) decrease; negative
C) decrease; positive
D) increase; positive
E) not affect; equal to one

Question

Quizplus · Accepted Answer

As the price of the underlying stock increases, the value of the put option decreases. This is because the put option gives the holder the right to sell the stock at a predetermined price, and if the current stock price is higher than the predetermined price, then it is not profitable for the holder to exercise the option. Put option delta is always negative, as the value of the option decreases as the stock price increases.

An Increase in the Price of the Underlying Stock Will