If a stock price increases, the price of a put option on the stock will ________ and the price of a call option on the stock will ________.
A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase

Question

Quizplus · Accepted Answer

When a stock price increases, the price of a put option (which gives the holder the right to sell the stock at a predetermined price) typically decreases because the option becomes less valuable. Conversely, the price of a call option (which gives the holder the right to buy the stock at a predetermined price) typically increases because the option becomes more valuable.

If a Stock Price Increases, the Price of a Put