Consider two European put options, written on the same asset, with the same maturity, but different strike prices: K1< K2
Which option is more expensive?
Then Answer the same question, but using call options instead.
It made sense to me that a put option - a sell option, with a higher strike price, would be worth more, hence is more expensive. And a call option - a buy option, with a higher strike price would be bought for more, so again is worth more and is more expensive? Or is that completely wrong?
A European put option gives you the right to sell an underlying asset at a certain price (the strike price) at a certain time (the expiry date). You would want to sell an asset at a higher price. Therefore the put option with a higher strike price would be more expensive, all other things being equal.
A European call option gives you the right to buy an underlying asset at a certain price (the strike price) at a certain time (the expiry date). You would want to buy an asset at a lower price. Therefore the call option with a lower strike price would be more expensive, all other things being equal.