Question

When the stock price goes up, the price of the call option on the stock will ______; and the price of the put option on the stock will ________.

(go up/ go down)

Answer 1

Ans:

When the stock price goes up, the price of the call option on the stock will go up and the price of the put option on the stock will go down

Explanation : when prices increases, the call option buyer will have right to sell when stock price is more than stike prices. It means when prices increases investor will get more profit. Since price provide provide the price of call option also increases gradually as many people will be interested to buy the options.

Similarly the price increase will make loss to put option holder as profit arises when stock price is below strike. Since increase makes loss to investor price of put option reduces as no one purchase such option