How do dividends generally affect call and put option prices?

Dividends have a notable impact on the pricing of call and put options due to the underlying asset's expected cash flow. When a company declares a dividend, it typically results in a decrease in the price of the underlying stock on the ex-dividend date. This is because the stock price adjusts downward to reflect the payout of cash to shareholders.

For call options, which give the holder the right to purchase the underlying asset at a specified price, the decrease in the underlying stock price due to dividends tends to reduce their value. This is because a lower stock price means that it is less likely for the option to end up in-the-money at expiration.

Conversely, for put options, which grant the right to sell the underlying asset, the anticipated drop in stock price due to dividend payments can lead to an increase in their value. Since the put option's profitability increases as the underlying stock price decreases, the effect of dividends is beneficial for put buyers.

Therefore, the general trend is that dividends will decrease the prices of call options while increasing the prices of put options, aligning with the correct answer.