Exam 9: Mechanics of Options Markets

Consider an exchange traded put option to sell 100 shares for $20. Give i) A 5 for 1 stock split a) _ _ _ _ _ _ b) _ _ _ _ _ _ ii) A 25% stock dividend a) _ _ _ _ _ _ b) _ _ _ _ _ _ iii) A $5 cash dividend a) _ _ _ _ _ _ b) _ _ _ _ _ _

A trader writes two naked put option contracts. The option price is $3, the strike price is $40 and the stock price is $42. What is the initial margin? _ _ _ _ _ _

Supposed that the investor also writes a one-year European call option on the same stock with the same strike price as calculated above. The price of the call option is $5. Draw a diagram illustrating how the investor's profit or loss varies with the terminal stock price.

Which of the following led to BHP issuing more shares? choose three)