I'm confused. I've read conflicting effects of interest rates on option prices.
Some say as interest rates rise:
-Puts decrease in value while calls increase in value.
Others say as interest rates rise:
-Both puts and calls decrease in value.
What's the right answer?
NVM: I think I know the answer.
-The first statement takes into account the effect of interest rates on the underlying.
-The second statement assumes that options exist in a vacuum.
Thus, I would say the first statement is most accurate.
Some say as interest rates rise:
-Puts decrease in value while calls increase in value.
Others say as interest rates rise:
-Both puts and calls decrease in value.
What's the right answer?
NVM: I think I know the answer.
-The first statement takes into account the effect of interest rates on the underlying.
-The second statement assumes that options exist in a vacuum.
Thus, I would say the first statement is most accurate.
