Exam 25: Conclusion

On March 30 you are holding a call option on a stock (exercise price of $60), which will expire on March 31.The closing price of the stock on March 30 is $59.What is the value of your call option?

A stock is currently selling for $70 per share and its call option has a $90 exercise price.What is the lower limit on the value of the call option?

Circular File stock is selling for $25 a share.You see that call options on the stock with exercise price of $20 are selling at $3.What should you do? What will happen to the option price as investors identify this opportunity? Then you observe that put options on Circular File with exercise price $30 are selling for $4.What should you do?

Determine the payoff and profits for a put option costing $25 with an exercise price of $175, and a stock price (at expiration) with a value of $145.

An investor who is buying a put option is expecting:

Which of the following is correct concerning callable bonds?

Which of the following statements is correct?

You are currently holding a call option on a stock with an exercise price of $80.If the current stock price is $60, your net proceeds by exercising this option will be:

The value of a call option increases as the strike price increases.

Investors who buy calls or puts have a cap on their possible losses from holding options.Specifically, they cannot lose more than the value of their premium.How does this differ for investors who sell options?

Circular file stock is selling for $50 a share.You see that call options on the stock with an exercise price of $40 are selling at $6.What should you do? What will happen to the option price as investors identify this opportunity?

When the stock price is very high compared to the exercise price, the call option premium approximates the difference between the stock price and strike price.

The longer the time until expiration of a call option, the greater the value of the option.

At expiration a call option will have no value if the stock price is less than exercise price.

Determine the payoff and profits for a call option costing $24 with an exercise price of $160, and a stock price (at expiration) with a value of $195.

At what point is the payoff from owning a call option on a stock greater than the payoff from owning the stock itself?

An investor can create a straddle position by doing the following:

The payoffs from holding a call option can be replicated by:

When does a change in the value of a call option come the closest to matching the price change in a share of stock?

What options may be provided in financial securities?