There is an positive relationship between the price of a put option and the volatility of the underlying common stock.

Question

Quizplus · Accepted Answer

This is known as the volatility skew. As volatility increases, the demand for put options to hedge against potential downside risk also increases. This drives up the price of put options, resulting in a positive relationship between the price of a put option and the volatility of the underlying common stock.

There Is an Positive Relationship Between the Price of a Put