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If the stock price decreases, all else equal, the price of a put option on that stock __________ and the price of a call option on that stock __________
If the stock price decreases, all else equal, the price of a put option on that stock __________ and the price of a call option on that stock __________.
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A) decreases, increases
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B) decreases, decreases
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C) increases, decreases
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D) increases, increases
Expert Solution
An option price increases as it moves towards in-the money status
A put option moves towards in the money when the stock price decreases
A call option moves towards in the money when the stock price increases
In the above scenario, the stock price decreases, and hence the price of the put option would increase while the price of the call option would decrease
Correct choice C
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