Question 1

You own 2 SPX call options with a strike of 1930. What is the payoff at maturity for this option contract if the S&P 500 index is 1980?

Accepted Answer

A) $0 
B) $100 
C) $2,000 
D) $10,000 
E) $15,000 
A) $0 
B) $100 
C) $2,000 
D) $10,000 
E) $15,000

Question 2

A call option has a premium of $1.95, a strike price of $45, and 3 months to expiration. The current stock price is $42.20. The stock will pay a $1.15 dividend in one month. The risk-free rate is 2.5%. What is the premium on a 3-month put with a strike price of $45? Assume the options are European style.

Accepted Answer

A) $2.08 
B) $2.15 
C) $3.32 
D) $4.12 
E) $5.62 
A) $2.08 
B) $2.15 
C) $3.32 
D) $4.12 
E) $5.62

Question 3

Which of the following characteristics are correct regarding the old style option quotation system?
I. The system is known as OPRA - the Options Price Reporting Authority code.
II. The system has 3 data elements.
III. The system has 21 characters.
IV. The system has 5 characters.
V. The system is known as the OCC Series Key.
VI. The root symbol is the underlying stock's ticker symbol.

Accepted Answer

A) I, II, III, and VI 
B) II, III, IV, and V 
C) I, II, and IV 
D) II, III, V, and VI 
E) III, V, and VI 
A) I, II, III, and VI 
B) II, III, IV, and V 
C) I, II, and IV 
D) II, III, V, and VI 
E) III, V, and VI

Question 4

You purchased 6 call options with a $40 strike price at a total cost of $150. On the expiration date, the underlying stock was priced at $39.20. What is the percentage return on your investment?

Accepted Answer

A) −420.00% 
B) −100.00% 
C) 68.75% 
D) 2.02% 
E) 220.00% 
A) −420.00% 
B) −100.00% 
C) 68.75% 
D) 2.02% 
E) 220.00%

Question 5

You own 2 SPX put options with a strike of 1600. What is the payoff at maturity for this option contract if the S&P 500 index is 1622?

Accepted Answer

A) −$4,400 
B) −$44 
C) $0 
D) $44 
E) $4,400 
A) −$4,400 
B) −$44 
C) $0 
D) $44 
E) $4,400

Question 6

What is the current price per underlying share if you wish to buy a June $32.50 call option on General Electric stock?
 $\text { General Electric }$
$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text {CALL}$ $\quad $ $\quad $ $\quad $$\text {PUT}$
$\begin{array}{rrrrrr}
\operatorname{Exp} & \text { Strike } & \text { Bid } & \text { Ask } & \text { Bid } & \text { Ask }\
\text { Jun } & 32.50 & .68 & .70 & .70 & .73 \
\text { Sep } & 32.50 & 1.60 & 1.62 & 1.64 & 1.68 \
\text { Jun } & 34.00 & .18 & .19 & 1.73 & 1.77 \
\text { Sep } & 34.00 & .93 & .95 & 2.52 & 2.56
\end{array}$

Accepted Answer

A) $.68 
B) $.70 
C) $.73 
D) $1.60 
E) $1.62 
A) $.68 
B) $.70 
C) $.73 
D) $1.60 
E) $1.62

Question 7

A 6-month call has a strike price of $50. The underlying stock is priced at $51.30 and the option premium on the call is $1.80. What is the per share time value of the call?

Accepted Answer

A) $0 
B) $.40 
C) $.50 
D) $.60 
E) $3.10 
A) $0 
B) $.40 
C) $.50 
D) $.60 
E) $3.10

Question 8

You own 2 SPX put options with a strike of 1744. What is the payoff at maturity for this option contract if the S&P 500 index is 1722?

Accepted Answer

A) −$4,400 
B) −$44 
C) $0 
D) $44 
E) $4,400 
A) −$4,400 
B) −$44 
C) $0 
D) $44 
E) $4,400

Question 9

A 4-month, $30 call option on Teller stock has an option premium of $.35. The 4-month, $30 put option has an option premium of $.60. The risk-free rate is 1.1%. The options are European-style. What is the price of Teller stock?

Accepted Answer

A) $29.20 
B) $29.53 
C) $29.64 
D) $29.97 
E) $30.08 
A) $29.20 
B) $29.53 
C) $29.64 
D) $29.97 
E) $30.08

Question 10

Kathy implemented an option trading strategy consisting of two call options. This strategy is known as which one of the following?

Accepted Answer

A) spread 
B) straddle 
C) split 
D) combination 
E) counteraction 
A) spread 
B) straddle 
C) split 
D) combination 
E) counteraction

Question 11

A call option with 1 month to expiration currently sells for $.70. A put option with the same expiration sells for $1.10. The options are European style. The risk-free rate is 3% and the strike price of both options is $18.00. What is the current stock price?

Accepted Answer

A) $16.87 
B) $17.06 
C) $17.29 
D) $17.56 
E) $17.86 
A) $16.87 
B) $17.06 
C) $17.29 
D) $17.56 
E) $17.86

Question 12

The maximum:

Accepted Answer

A) profit from buying a put is the stock price. 
B) loss from writing a put is the option premium. 
C) profit from writing a call is the strike price. 
D) loss from buying a call is $0. 
E) profit from writing a put is the option premium. 
A) profit from buying a put is the stock price. 
B) loss from writing a put is the option premium. 
C) profit from writing a call is the strike price. 
D) loss from buying a call is $0. 
E) profit from writing a put is the option premium.

Question 13

A 6-month put has a strike price of $32.50. The underlying stock's price is $31.10. What is intrinsic value of this put?

Accepted Answer

A) $0 
B) $.70 
C) $1.40 
D) $2.10 
E) $2.80 
A) $0 
B) $.70 
C) $1.40 
D) $2.10 
E) $2.80

Question 14

Which one of the following correctly defines the range of time values for an American put option?

Accepted Answer

A) $0 to +$1 
B) −$1 to +$1 
C) ≤ $0 
D) ≥ $0 
E) = $0 
A) $0 to +$1 
B) −$1 to +$1 
C) ≤ $0 
D) ≥ $0 
E) = $0

Question 15

Which of the following issues exchange-listed option contracts?
I. CBOE
II. SEC
III. OCC
IV. NASDAQ

Accepted Answer

A) III only 
B) IV only 
C) I and III only 
D) II and IV only 
E) I, II, and III only 
A) III only 
B) IV only 
C) I and III only 
D) II and IV only 
E) I, II, and III only

Question 16

You bought a put with a strike price of $35. The current stock price is $34. What is the current payoff value of this option?

Accepted Answer

A) −$2 
B) −$1 
C) $0 
D) $1 
E) $2 
A) −$2 
B) −$1 
C) $0 
D) $1 
E) $2

Question 17

You purchased a call option with a $17.35 strike price and a call premium of $.30. On the expiration date, the underlying stock was priced at $18.55 per share. What is the percentage return on your investment?

Accepted Answer

A) −100% 
B) 0% 
C) 125% 
D) 200% 
E) 300% 
A) −100% 
B) 0% 
C) 125% 
D) 200% 
E) 300%

Question 18

A 3-month put has a strike price of $50. The underlying stock's price is $48.75. What is the intrinsic value of this put?

Accepted Answer

A) $0 
B) $.90 
C) $1.25 
D) $2.30 
E) $3.60 
A) $0 
B) $.90 
C) $1.25 
D) $2.30 
E) $3.60

Question 19

Which one of the following values is discounted in the put-call parity formula?

Accepted Answer

A) call price 
B) put price 
C) stock price 
D) strike price 
E) option premium 
A) call price 
B) put price 
C) stock price 
D) strike price 
E) option premium

Question 20

A stock is currently selling for $20.65. A 3-month call option with a strike price of $20 has an option premium of $1.30. The risk-free rate is 2% and the market rate is 8%. What is the option premium on a 3-month put with a $20 strike price? Assume the options are European style.

Accepted Answer

A) $0 
B) $.15 
C) $.35 
D) $.55 
E) $.75 
A) $0 
B) $.15 
C) $.35 
D) $.55 
E) $.75

You own 2 SPX call options with a strike of 1930. What is the payoff at maturity for this option contract if the S&P 500 index is 1980?

You purchased 6 call options with a $40 strike price at a total cost of $150. On the expiration date, the underlying stock was priced at $39.20. What is the percentage return on your investment?

You own 2 SPX put options with a strike of 1600. What is the payoff at maturity for this option contract if the S&P 500 index is 1622?

A 6-month call has a strike price of $50. The underlying stock is priced at $51.30 and the option premium on the call is $1.80. What is the per share time value of the call?

You own 2 SPX put options with a strike of 1744. What is the payoff at maturity for this option contract if the S&P 500 index is 1722?

A 4-month, $30 call option on Teller stock has an option premium of $.35. The 4-month, $30 put option has an option premium of $.60. The risk-free rate is 1.1%. The options are European-style. What is the price of Teller stock?

Kathy implemented an option trading strategy consisting of two call options. This strategy is known as which one of the following?

A call option with 1 month to expiration currently sells for $.70. A put option with the same expiration sells for $1.10. The options are European style. The risk-free rate is 3% and the strike price of both options is $18.00. What is the current stock price?

The maximum:

A 6-month put has a strike price of $32.50. The underlying stock's price is $31.10. What is intrinsic value of this put?

Which one of the following correctly defines the range of time values for an American put option?

Which of the following issues exchange-listed option contracts? I. CBOE II. SEC III. OCC IV. NASDAQ

You bought a put with a strike price of $35. The current stock price is $34. What is the current payoff value of this option?

You purchased a call option with a $17.35 strike price and a call premium of $.30. On the expiration date, the underlying stock was priced at $18.55 per share. What is the percentage return on your investment?

A 3-month put has a strike price of $50. The underlying stock's price is $48.75. What is the intrinsic value of this put?

Which one of the following values is discounted in the put-call parity formula?

A stock is currently selling for $20.65. A 3-month call option with a strike price of $20 has an option premium of $1.30. The risk-free rate is 2% and the market rate is 8%. What is the option premium on a 3-month put with a $20 strike price? Assume the options are European style.

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 15: Stock Options

You own 2 SPX call options with a strike of 1930. What is the payoff at maturity for this option contract if the S&P 500 index is 1980?

You purchased 6 call options with a $40 strike price at a total cost of $150. On the expiration date, the underlying stock was priced at $39.20. What is the percentage return on your investment?

You own 2 SPX put options with a strike of 1600. What is the payoff at maturity for this option contract if the S&P 500 index is 1622?

A 6-month call has a strike price of $50. The underlying stock is priced at $51.30 and the option premium on the call is $1.80. What is the per share time value of the call?

You own 2 SPX put options with a strike of 1744. What is the payoff at maturity for this option contract if the S&P 500 index is 1722?

A 4-month, $30 call option on Teller stock has an option premium of $.35. The 4-month, $30 put option has an option premium of $.60. The risk-free rate is 1.1%. The options are European-style. What is the price of Teller stock?

Kathy implemented an option trading strategy consisting of two call options. This strategy is known as which one of the following?

A call option with 1 month to expiration currently sells for $.70. A put option with the same expiration sells for $1.10. The options are European style. The risk-free rate is 3% and the strike price of both options is $18.00. What is the current stock price?

The maximum:

A 6-month put has a strike price of $32.50. The underlying stock's price is $31.10. What is intrinsic value of this put?

Which one of the following correctly defines the range of time values for an American put option?

Which of the following issues exchange-listed option contracts? I. CBOE II. SEC III. OCC IV. NASDAQ

You bought a put with a strike price of $35. The current stock price is $34. What is the current payoff value of this option?

You purchased a call option with a $17.35 strike price and a call premium of $.30. On the expiration date, the underlying stock was priced at $18.55 per share. What is the percentage return on your investment?

A 3-month put has a strike price of $50. The underlying stock's price is $48.75. What is the intrinsic value of this put?

Which one of the following values is discounted in the put-call parity formula?

A stock is currently selling for $20.65. A 3-month call option with a strike price of $20 has an option premium of $1.30. The risk-free rate is 2% and the market rate is 8%. What is the option premium on a 3-month put with a $20 strike price? Assume the options are European style.

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters