Question

To maximize profit, the writer (seller) of a call option wants the price of the underlying...

To maximize profit, the writer (seller) of a call option wants the price of the underlying asset (S) to __________ and the holder (buyer) of a put option wants the price of the underlying asset (S) to __________.

Question 5 options:

decrease, decrease

decrease, increase

increase, decrease

increase, increase
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Answer #1

The correct is option A i.e. decrease, decrease

To maximize profit, the writer (seller) of a call option wants the price of the underlying asset (S) to decrease and the holder (buyer) of a put option wants the price of the underlying asset (S) to decrease.

Since, buyer of the call option wants price to increase, whereas seller of the call option wants price to decrease,

Whereas the buyer of the put option wants price to decrease and seller of the put option wants price to increase.

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