The greater the volatility of the underlying stock, the ____ the call option premium and the ____ the put option premium.Select one:a. lower; higherb. higher; lowerc. higher; higherd. lower; lower

The correct answer is c. higher; higher.

Here's why:

1. Volatility refers to the degree of variation of a trading price series over time. It is often used by traders to gauge the risk associated with a particular investment.

2. A call option gives the holder the right to buy a stock at a specified price, known as the strike price, by a specific date. A put option, on the other hand, gives the holder the right to sell a stock at the strike price by a specific date.

3. When the volatility of the underlying stock is high, it means that the stock's price can change dramatically in a very short time, making it possible for the investor to make a profit. This increases the value of the option, hence the premium of the option will be higher.

4. This applies to both call and put options. For call options, a volatile market means there's a higher chance the stock's price will surge past the strike price, making the option more valuable. For put options, a volatile market increases the chance the stock's price will drop below the strike price, also increasing the option's value.

So, the greater the volatility of the underlying stock, the higher the call option premium and the higher the put option premium.