hinsafdar

Greater volatility in the price of the underlying asset will have what effect on the value of a call option and the value of a put option?

Value of a call option

Value of a put option

A) Increase Decrease

B) Decrease Increase

C) Increase Increase

---

Greater volatility in the price of the underlying asset increases the values of both puts and calls because options are “one-sided.” Since an option’s value can fall no lower than zero (it expires out of the money), increased volatility increases an option’s upside potential but does not increase its downside exposure.