Chapter 03 · Section 3.1

Exercise price increase

Now the same question for the exercise price. A higher exercise price means that:

a) the put premium is higher.
• b) the call premium is higher.
  No. The call, or the right to buy at a specified exercise price, is worth less the higher the exercise price. Everybody prefers to buy at a low price.
  c) the put premium is lower.
  d) the call premium is lower.
  e) b and c
  f) a and d

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