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Basic Question 4 of 14
The downside effect of volatility hurts:
II. puts.
B. II only
C. both I and II
D. neither
I. calls.
II. puts.
A. I only
B. II only
C. both I and II
D. neither
User Contributed Comments 5
| User | Comment |
|---|---|
| antarctica | should be more specific in the answer: the volatility of stock price in the downside range does not affect either puts or calls. |
| bobert | No, it does affect puts. There are more possible downside values which are profitable for owning a put. The answer is right, it does not hurt either of them. |
| fabsan | If downside effect of volatility means less volatility for the underlying, then answer D is the proper answer. Higher volatility for the underlying = higher volatility for the option. |
| Inaganti6 | Why doesn't the question state lack of volatility ? |
| MariaDunet | Downside affect of volatility means decrease in prices of the underlying not in volatility. Changes in prices=increase in volatility =increase in values of both options. So it doesn’t hurts. |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
identify the factors that determine the value of an option and describe how each factor affects the value of an option
CFA® 2025 Level I Curriculum, Volume 5, Module 8.