Both call and put option premiums are affected by the level of the existing spot price relative to the strike price; for example, a high spot price relative to the strike price will result in a relatively high premium for a call option but a relatively low premium for a put option.

Question

Quizplus · Accepted Answer

This statement is true. A high spot price relative to the strike price will make it more likely that the underlying asset will be worth more than the strike price at expiration, increasing the probability of profit for the call option holder and therefore increasing the call option premium. On the other hand, it decreases the probability of profit for the put option holder, resulting in a lower put option premium.

Both Call and Put Option Premiums Are Affected by the Level