Exam 21: Option Valuation

Portfolio A consists of 400 shares of stock and 400 calls on that stock.Portfolio B consists of 500 shares of stock.The call delta is 0.5.Which portfolio has a higher dollar exposure to a change in stock price

A call option has an intrinsic value of zero if the option is

The dollar change in the value of a stock call option is always

A put option is currently selling for $6 with an exercise price of $50.If the hedge ratio for the put is -0.30 and the stock is currently selling for $46, what is the elasticity of the put

Lower dividend payout policies have a __________ impact on the value of the call and a __________ impact on the value of the put compared to higher dividend payout policies.

A hedge ratio of 0.85 implies that a hedged portfolio should consist of

Since deltas change as stock values change, portfolio hedge ratios must be constantly updated in active markets.This process is referred to as

A put option on the S&P 500 Index will best protect a portfolio

Prior to expiration

At expiration, the time value of an at-the-money put option is always

A hedge ratio of 0.70 implies that a hedged portfolio should consist of

The elasticity of a stock put option is always

The time value of a put option is I) the difference between the option's price and the value it would have if it were expiring immediately. II) the same as the present value of the option's expected future cash flows. III) the difference between the option's price and its expected future value. IV) different from the usual time value of money concept.

An American-style call option with six months to maturity has a strike price of $42.The underlying stock now sells for $50.The call premium is $14. What is the intrinsic value of the call

If the hedge ratio for a stock call is 0.50, the hedge ratio for a put with the same expiration date and exercise price as the call would be

A hedge ratio for a call is always

Relative to European puts, otherwise identical American put options

The gamma of an option is

Other things equal, the price of a stock call option is negatively correlated with which of the following factors

A hedge ratio for a call option is ________ and a hedge ratio for a put option is ______.