Question 1

The value of a listed put option on a stock is lower when _______________.
I.the exercise price is higher
II.the contract approaches maturity
III.the stock decreases in value
IV.a stock split occurs

Accepted Answer

A)   II only
B)   II and IV only
C)   I, II and III only
D)   I, II, III and IVE) A) and B)
F) None of the above

Question 2

Bill Jones inherited 5,000 shares of stock priced at $45 per share.He does not want to sell the stock this year due to tax reasons but he is concerned the stock will drop in value before year end.Bill wants to use a collar to ensure that he minimizes his risk and doesn't incur too much cost in deferring the gain.January call options with a strike of $50 are quoted at a cost of $2 and January puts with a $40 exercise price are quoted at a cost of $3.If Bill establishes the collar and the stock price winds up at $35 in January,Bill's net position value including the option profit or loss and the stock is _________.

Accepted Answer

A)   $195,000
B)   $220,000
C)   $175,000
D)   $215,000E) None of the above
F) All of the above

Question 3

You invest in the stock of Rayleigh Corp.and write a call option on Rayleigh Corp.This strategy is called a _________.

Accepted Answer

A)   covered call
B)   long straddle
C)   naked call
D)   money spreadE) All of the above
F) None of the above

Question 4

At contract maturity the value of a put option is ___________ where X equals the option's strike price and ST is the stock price at contract expiration.

Accepted Answer

A)   Max(0, ST - X) 
B)   Min(0, ST - X) 
C)   Max(0, X - ST) 
D)   Min(0, X - ST) E) C) and D)
F) A) and B)

Question 5

Which strategy benefits from upside price movement and has some protection should the price of the security fall?

Accepted Answer

A)   Bull spread
B)   Long put
C)   Short call
D)   StraddleE) A) and B)
F) A) and C)

Question 6

A put on Sanders stock with a strike price of $35 is priced at $2 per share while a call with a strike price of $35 is priced at $3.50.The maximum per share loss to the writer of an uncovered put is __________ and the maximum per share gain to the writer of an uncovered call is _________.

Accepted Answer

A)   $33.00; $3.50
B)   $33.00; $31.50
C)   $35.00; $3.50
D)   $35.00; $35.00E) None of the above
F) A) and D)

Question 7

You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes: 
-If in June the stock price is $53 your net profit on the bull money spread would be ________.

Accepted Answer

A)   $300
B)   -$400
C)   $150
D)   $50E) A) and B)
F) B) and D)

Question 8

The potential loss for a writer of a naked call option on a stock is _________.

Accepted Answer

A)   equal to the call premium
B)   larger the lower the stock price
C)   limited
D)   unlimitedE) A) and B)
F) A) and C)

Exam 15: Options Markets

The potential loss for a writer of a naked call option on a stock is _________.

Correct Answer
verified

Which strategy benefits from upside price movement and has some protection should the price of the security fall?

Correct Answer
verified

Correct Answer
verified

At contract maturity the value of a put option is ___________ where X equals the option's strike price and S_T is the stock price at contract expiration.

Correct Answer
verified

You invest in the stock of Rayleigh Corp.and write a call option on Rayleigh Corp.This strategy is called a _________.

Correct Answer
verified

The value of a listed put option on a stock is lower when _______________. I.the exercise price is higher II.the contract approaches maturity III.the stock decreases in value IV.a stock split occurs

Correct Answer
verified

Correct Answer
verified

A put on Sanders stock with a strike price of $35 is priced at $2 per share while a call with a strike price of $35 is priced at $3.50.The maximum per share loss to the writer of an uncovered put is __ and the maximum per share gain to the writer of an uncovered call is _.

Correct Answer
verified

Exam 15: Options Markets

The potential loss for a writer of a naked call option on a stock is _________.

Correct AnswerverifiedShow Answer

Which strategy benefits from upside price movement and has some protection should the price of the security fall?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At contract maturity the value of a put option is ___________ where X equals the option's strike price and ST is the stock price at contract expiration.

Correct AnswerverifiedShow Answer

You invest in the stock of Rayleigh Corp.and write a call option on Rayleigh Corp.This strategy is called a _________.

Correct AnswerverifiedShow Answer

The value of a listed put option on a stock is lower when _______________. I.the exercise price is higher II.the contract approaches maturity III.the stock decreases in value IV.a stock split occurs

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A put on Sanders stock with a strike price of $35 is priced at $2 per share while a call with a strike price of $35 is priced at $3.50.The maximum per share loss to the writer of an uncovered put is __________ and the maximum per share gain to the writer of an uncovered call is _________.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

At contract maturity the value of a put option is ___________ where X equals the option's strike price and S_T is the stock price at contract expiration.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A put on Sanders stock with a strike price of $35 is priced at $2 per share while a call with a strike price of $35 is priced at $3.50.The maximum per share loss to the writer of an uncovered put is __ and the maximum per share gain to the writer of an uncovered call is _.

Correct Answer
verified