Question 1

Jeff paid a call premium of $.60 when he purchased his call option with a strike price of $22. What is the break-even stock price?

Accepted Answer

A) $0 
B) $.25 
C) $22.25 
D) $22.60 
E) $22.75 
A) $0 
B) $.25 
C) $22.25 
D) $22.60 
E) $22.75

Question 2

Which of the following has the obligation to purchase stock at the strike price when an option is exercised?

Accepted Answer

A) call holder 
B) call writer 
C) put holder 
D) put writer 
E) call writer and put holder 
A) call holder 
B) call writer 
C) put holder 
D) put writer 
E) call writer and put holder

Question 3

Josh owns 2 call options on Foster Glass stock. The exercise price is $47.50 and the stock price at expiration is $49.01. What is the total payoff on the option contracts?

Accepted Answer

A) $0 
B) −$3.02 
C) $3.02 
D) $30.20 
E) $302.00 
A) $0 
B) −$3.02 
C) $3.02 
D) $30.20 
E) $302.00

Question 4

Which one of the following statements is correct?

Accepted Answer

A) Reduced Value index options are equal in size to one percent of the standard index option. 
B) The holder of a stock index put option is betting that the underlying index will increase in value. 
C) Most index options are traded on the New York Options Exchange. 
D) The contract size for a call option on the S&P 500 is 10 times the index. 
E) Some stock index options close in the morning while others close at the end of the trading day. 
A) Reduced Value index options are equal in size to one percent of the standard index option. 
B) The holder of a stock index put option is betting that the underlying index will increase in value. 
C) Most index options are traded on the New York Options Exchange. 
D) The contract size for a call option on the S&P 500 is 10 times the index. 
E) Some stock index options close in the morning while others close at the end of the trading day.

Question 5

Which one of the following is defined as the price at which an option will be exercised?

Accepted Answer

A) straddle 
B) spread 
C) strike 
D) market 
E) underlying 
A) straddle 
B) spread 
C) strike 
D) market 
E) underlying

Question 6

Tim purchased 5 put option contracts on Western Fields stock. The strike price was $35 and the option premium was $.55. At expiration, the stock was selling for $35.75. What is the payoff on the option contracts?

Accepted Answer

A) −$60 
B) −$30 
C) $0 
D) $30 
E) $60 
A) −$60 
B) −$30 
C) $0 
D) $30 
E) $60

Question 7

You purchased 7 put option contracts on Alto Industries. The strike price was $42.50 and the option premium was $1.30. On the expiration date, the stock was valued at $41.40 a share. What is the payoff on the option contracts?

Accepted Answer

A) −$140 
B) $0 
C) $110 
D) $360 
E) $770 
A) −$140 
B) $0 
C) $110 
D) $360 
E) $770

Question 8

An option that would not yield a positive payoff if exercised today is referred to by which one of the following terms?

Accepted Answer

A) hollow option 
B) zero option 
C) in-the-cellar option 
D) out-of-the-money option 
E) strike-out option 
A) hollow option 
B) zero option 
C) in-the-cellar option 
D) out-of-the-money option 
E) strike-out option

Question 9

A decrease in which one of the following will increase the intrinsic value of a put option?

Accepted Answer

A) strike price 
B) exercise price 
C) option premium 
D) time value 
E) underlying stock price 
A) strike price 
B) exercise price 
C) option premium 
D) time value 
E) underlying stock price

Question 10

What is the maximum percentage loss you can incur if you buy a put option?

Accepted Answer

A) 0% 
B) 10% 
C) 100% 
D) 1,000% 
E) unlimited percentage 
A) 0% 
B) 10% 
C) 100% 
D) 1,000% 
E) unlimited percentage

Question 11

Jasmine purchased one call option with a strike price of $35 when the call premium was $1.10. What is the break-even stock price?

Accepted Answer

A) $0 
B) $33.90 
C) $34.45 
D) $35.00 
E) $36.10 
A) $0 
B) $33.90 
C) $34.45 
D) $35.00 
E) $36.10

Question 12

You currently own 200 shares of Amazon stock. If you purchase options on this stock to guard against future declines in the price of the stock you are implementing which one of the following?

Accepted Answer

A) covered call 
B) naked call 
C) protective put 
D) bear spread 
E) straddle 
A) covered call 
B) naked call 
C) protective put 
D) bear spread 
E) straddle

Question 13

Which one of the following refers to selling an option contract?

Accepted Answer

A) calling 
B) writing 
C) exercising 
D) striking 
E) spotting 
A) calling 
B) writing 
C) exercising 
D) striking 
E) spotting

Question 14

How much will it cost to purchase 4 June $27.50 calls on Texas Instruments?
$\text { Iexas Instruments (TXN) }$
$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text {CALL}$ $\quad $ $\quad $ $\quad $$\text {PUT}$
$\begin{array}{llllll}
\text { Exp } & \text { Strike } & \text { Bid } & \text { Ask } & \text { Bid } & \text { Ask }\
\text { May } & 25.00 & 6.60 & 6.70 & \text { N/A } & .01 \
\text { Jun } & 25.00 & 6.50 & 6.75 & \text { N/A } & .03 \
\text { Oct } & 25.00 & 6.95 & 7.25 & .39 & .42 \
\text { May } & 27.50 & 4.10 & 4.15 & \text { N/A } & .01\
\text { Jun}&27.50&4.05&4.30&.07&.10
\end{array}$

Accepted Answer

A) $21 
B) $1,215 
C) $1,245 
D) $1,720 
E) $2,075 
A) $21 
B) $1,215 
C) $1,245 
D) $1,720 
E) $2,075

Question 15

An option trading strategy that utilizes both put and call options is referred to as which one of the following?

Accepted Answer

A) bull call spread 
B) butterfly spread 
C) split 
D) combination 
E) counteraction 
A) bull call spread 
B) butterfly spread 
C) split 
D) combination 
E) counteraction

Question 16

You own 200 shares of Allen Bros. stock. Which one of the following would allow you to receive an option premium in exchange for selling your shares in Allen Bros. at the strike price?

Accepted Answer

A) straddle 
B) long spread 
C) selling a put 
D) buying a call 
E) writing a covered call 
A) straddle 
B) long spread 
C) selling a put 
D) buying a call 
E) writing a covered call

Question 17

At what price will a dealer sell the Jun $34 put 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) $1.64 
B) $1.73 
C) $1.77 
D) $2.52 
E) $2.56 
A) $1.64 
B) $1.73 
C) $1.77 
D) $2.52 
E) $2.56

Question 18

A list of available option contracts and their prices for a particular security listed in order of strike price and maturity date is referred to as which one of the following?

Accepted Answer

A) value chain 
B) intrinsic list 
C) option chain 
D) strike list 
E) exercise price display 
A) value chain 
B) intrinsic list 
C) option chain 
D) strike list 
E) exercise price display

Question 19

Laney just purchased 3 call option contracts on Microsoft stock. How many shares of stock can she buy at the strike price based on these contracts?

Accepted Answer

A) 3 
B) 30 
C) 300 
D) 30,000 
E) 300,000 
A) 3 
B) 30 
C) 300 
D) 30,000 
E) 300,000

Question 20

A 3-month put has a strike price of $50 and an option premium of $3.10. The underlying stock is selling for $47.80 per share. What is the time value of the put?

Accepted Answer

A) $0 
B) $.60 
C) $.90 
D) $1.10 
E) $2.20 
A) $0 
B) $.60 
C) $.90 
D) $1.10 
E) $2.20

Jeff paid a call premium of $.60 when he purchased his call option with a strike price of $22. What is the break-even stock price?

Which of the following has the obligation to purchase stock at the strike price when an option is exercised?

Josh owns 2 call options on Foster Glass stock. The exercise price is $47.50 and the stock price at expiration is $49.01. What is the total payoff on the option contracts?

Which one of the following statements is correct?

Which one of the following is defined as the price at which an option will be exercised?

Tim purchased 5 put option contracts on Western Fields stock. The strike price was $35 and the option premium was $.55. At expiration, the stock was selling for $35.75. What is the payoff on the option contracts?

You purchased 7 put option contracts on Alto Industries. The strike price was $42.50 and the option premium was $1.30. On the expiration date, the stock was valued at $41.40 a share. What is the payoff on the option contracts?

An option that would not yield a positive payoff if exercised today is referred to by which one of the following terms?

A decrease in which one of the following will increase the intrinsic value of a put option?

What is the maximum percentage loss you can incur if you buy a put option?

Jasmine purchased one call option with a strike price of $35 when the call premium was $1.10. What is the break-even stock price?

You currently own 200 shares of Amazon stock. If you purchase options on this stock to guard against future declines in the price of the stock you are implementing which one of the following?

Which one of the following refers to selling an option contract?

An option trading strategy that utilizes both put and call options is referred to as which one of the following?

You own 200 shares of Allen Bros. stock. Which one of the following would allow you to receive an option premium in exchange for selling your shares in Allen Bros. at the strike price?

A list of available option contracts and their prices for a particular security listed in order of strike price and maturity date is referred to as which one of the following?

Laney just purchased 3 call option contracts on Microsoft stock. How many shares of stock can she buy at the strike price based on these contracts?

A 3-month put has a strike price of $50 and an option premium of $3.10. The underlying stock is selling for $47.80 per share. What is the time value of the put?

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

Jeff paid a call premium of $.60 when he purchased his call option with a strike price of $22. What is the break-even stock price?

Which of the following has the obligation to purchase stock at the strike price when an option is exercised?

Josh owns 2 call options on Foster Glass stock. The exercise price is $47.50 and the stock price at expiration is $49.01. What is the total payoff on the option contracts?

Which one of the following statements is correct?

Which one of the following is defined as the price at which an option will be exercised?

Tim purchased 5 put option contracts on Western Fields stock. The strike price was $35 and the option premium was $.55. At expiration, the stock was selling for $35.75. What is the payoff on the option contracts?

You purchased 7 put option contracts on Alto Industries. The strike price was $42.50 and the option premium was $1.30. On the expiration date, the stock was valued at $41.40 a share. What is the payoff on the option contracts?

An option that would not yield a positive payoff if exercised today is referred to by which one of the following terms?

A decrease in which one of the following will increase the intrinsic value of a put option?

What is the maximum percentage loss you can incur if you buy a put option?

Jasmine purchased one call option with a strike price of $35 when the call premium was $1.10. What is the break-even stock price?

You currently own 200 shares of Amazon stock. If you purchase options on this stock to guard against future declines in the price of the stock you are implementing which one of the following?

Which one of the following refers to selling an option contract?

An option trading strategy that utilizes both put and call options is referred to as which one of the following?

You own 200 shares of Allen Bros. stock. Which one of the following would allow you to receive an option premium in exchange for selling your shares in Allen Bros. at the strike price?

A list of available option contracts and their prices for a particular security listed in order of strike price and maturity date is referred to as which one of the following?

Laney just purchased 3 call option contracts on Microsoft stock. How many shares of stock can she buy at the strike price based on these contracts?

A 3-month put has a strike price of $50 and an option premium of $3.10. The underlying stock is selling for $47.80 per share. What is the time value of the put?

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