Question 1

There are four basic option positions. Which of the below is ONE of these four positions?

Accepted Answer

A)  Buying a call option (short a call option) 
B)  Selling a call option (long a call option) 
C)  Buying a put option (short a put option) 
D)  Selling a put option (short a put option) 
A)  Buying a call option (short a call option) 
B)  Selling a call option (long a call option) 
C)  Buying a put option (short a put option) 
D)  Selling a put option (short a put option)

Question 2

In regards to the mechanics of trading futures options, which of the below statements is FALSE?

Accepted Answer

A)  Upon exercise, the futures price for the futures contract will be set equal to the exercise price and the position of the two parties is then immediately marked to market based on the then-current futures price. 
B)  Upon exercise, the option writer or seller must pay the option buyer the economic benefit from exercising. 
C)  In the case of a call futures option, the option writer must pay the difference between the current futures price and the exercise price to the buyer of the option. 
D)  In the case of a put futures option, the option buyer must pay the option writer or seller the difference between the exercise price and the current futures price. 
A)  Upon exercise, the futures price for the futures contract will be set equal to the exercise price and the position of the two parties is then immediately marked to market based on the then-current futures price. 
B)  Upon exercise, the option writer or seller must pay the option buyer the economic benefit from exercising. 
C)  In the case of a call futures option, the option writer must pay the difference between the current futures price and the exercise price to the buyer of the option. 
D)  In the case of a put futures option, the option buyer must pay the option writer or seller the difference between the exercise price and the current futures price.

Question 3

In regards to the mechanics of trading futures options, which of the below statements is FALSE?

Accepted Answer

A)  The exchange imposes margin requirements for the buyer of a futures option once the option price has been paid in full. 
B)  Because the maximum amount the buyer can lose is the option price, regardless of how adverse the price movement of the underlying instrument, there is no need for margin. 
C)  Because the writer of an option has agreed to accept all of the risk of the position in the underlying instrument, the writer is required to deposit not only the margin required on the interest rate futures contract position if that is the underlying instrument, but, with certain exceptions, also the option price that is received for writing the option. 
D)  If prices for the underlying futures contract adversely affect the writer's position, the writer would be required to deposit variation margin as it is marked to market. 
A)  The exchange imposes margin requirements for the buyer of a futures option once the option price has been paid in full. 
B)  Because the maximum amount the buyer can lose is the option price, regardless of how adverse the price movement of the underlying instrument, there is no need for margin. 
C)  Because the writer of an option has agreed to accept all of the risk of the position in the underlying instrument, the writer is required to deposit not only the margin required on the interest rate futures contract position if that is the underlying instrument, but, with certain exceptions, also the option price that is received for writing the option. 
D)  If prices for the underlying futures contract adversely affect the writer's position, the writer would be required to deposit variation margin as it is marked to market.

Question 4

The Options Clearing Corporation has established standard strike price guidelines for listed options. For stocks ________.

Accepted Answer

A)  with a price above $100, option strike prices are set at $10 intervals. 
B)  with a price below $100 and above $30, strike prices are set at $4 intervals. 
C)  priced between $10 and $30 the interval is $2. 
D)  with stock splits, the strike price is not adjusted. 
A)  with a price above $100, option strike prices are set at $10 intervals. 
B)  with a price below $100 and above $30, strike prices are set at $4 intervals. 
C)  priced between $10 and $30 the interval is $2. 
D)  with stock splits, the strike price is not adjusted.

Question 5

There are options traded on individual shares of common stock and options traded on common stock indexes.

Accepted Answer

A) True 
 B)False

There are four basic option positions. Which of the below is ONE of these four positions?

In regards to the mechanics of trading futures options, which of the below statements is FALSE?

In regards to the mechanics of trading futures options, which of the below statements is FALSE?

The Options Clearing Corporation has established standard strike price guidelines for listed options. For stocks ________.

There are options traded on individual shares of common stock and options traded on common stock indexes.

Introduction

Financial Institutions, Financial Intermediaries, and Asset Management Firms

Depository Institutions: Activities and Characteristics

The U.S. Federal Reserve and the Creation of Money

Monetary Policy in the United States

Insurance Companies

Investment Companies and Exchange Traded Funds

Pension Funds

Properties and Pricing of Financial Assets

The Level and Structure of Interest Rates

The Term Structure of Interest Rates

Risk/Return and Asset Pricing Models

Primary Markets and the Underwriting of Securities

Secondary Markets

Treasury and Agency Securities Markets

Municipal Securities Markets

Markets for Common Stock: The Basic Characteristics

Markets for Common Stock: Structure and Organization

Markets for Corporate Senior Instruments: I

Markets for Corporate Senior Instruments: II

The Markets for Bank Obligations

The Residential Mortgage Market

Mortgage-Backed Securities Market

Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities

Market for Asset-Backed Securities

Financial Futures Markets

Pricing of Futures and Options Contracts

The Applications of Futures and Options Contracts

OTC Interest Rate Derivatives: Forward Rate Agreements, Swaps, Caps, and Floors

Market for Credit Risk Transfer Vehicles: Credit Derivatives and Collateralized Debt Obligations

The Market for Foreign Exchange and Risk Control Instruments

Filters

Exam 27: Options Markets

There are four basic option positions. Which of the below is ONE of these four positions?

In regards to the mechanics of trading futures options, which of the below statements is FALSE?

In regards to the mechanics of trading futures options, which of the below statements is FALSE?

The Options Clearing Corporation has established standard strike price guidelines for listed options. For stocks ________.

There are options traded on individual shares of common stock and options traded on common stock indexes.

Introduction

Financial Institutions, Financial Intermediaries, and Asset Management Firms

Depository Institutions: Activities and Characteristics

The U.S. Federal Reserve and the Creation of Money

Monetary Policy in the United States

Insurance Companies

Investment Companies and Exchange Traded Funds

Pension Funds

Properties and Pricing of Financial Assets

The Level and Structure of Interest Rates

The Term Structure of Interest Rates

Risk/Return and Asset Pricing Models

Primary Markets and the Underwriting of Securities

Secondary Markets

Treasury and Agency Securities Markets

Municipal Securities Markets

Markets for Common Stock: The Basic Characteristics

Markets for Common Stock: Structure and Organization

Markets for Corporate Senior Instruments: I

Markets for Corporate Senior Instruments: II

The Markets for Bank Obligations

The Residential Mortgage Market

Mortgage-Backed Securities Market

Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities

Market for Asset-Backed Securities

Financial Futures Markets

Pricing of Futures and Options Contracts

The Applications of Futures and Options Contracts

OTC Interest Rate Derivatives: Forward Rate Agreements, Swaps, Caps, and Floors

Market for Credit Risk Transfer Vehicles: Credit Derivatives and Collateralized Debt Obligations

The Market for Foreign Exchange and Risk Control Instruments

Filters