What Happens to the Value of Call and Put Options

question 27

Multiple Choice

What happens to the value of call and put options if the volatility of the price of underlying asset decreases?

• A) Put options will be worth more, call options will be worth less.
• B) Put options will be worth less, call options will be worth more.
• C) Both call and put options will be worth more.
• D) Both call and put options will be worth less.

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Definitions:

Payments

Amounts of money paid by one party to another, often at regular intervals, in exchange for goods or services.

Repaid

The act of paying back money that was borrowed from a person, bank, or financial institution.

Interest Rate

The ratio at which interest is applied to money loaned by a borrower from a lending party.

Compounded Semi-annually

A financial term indicating the interest on an investment is calculated and added to the principal balance twice every year, enhancing the total return over periods.