Chapter 03 · Section 3.1
Underlying price increase
What effect would an increase in the price of the underlying increase asset have on the premium of an option?
a) The Put premium would increase
b) The Call premium would increase
c) The Put premium would decrease
d) The Call premium would decrease
e) a and d
f) b and c
If you own a call, you have the right to buy the underlying asset at the exercise price. The more the underlying asset is worth, the more the right to buy it at the exercise price is worth. For the put, it is the other way round.
(b) and (d) do not go together.