Question 1

How much option premium per share will you receive if you sell a September $34 put on General Electric stock?

Accepted Answer

A)  $1.64 
B)  $1.68 
C)  $1.77 
D)  $2.52 
E)  $2.56 
A)  $1.64 
B)  $1.68 
C)  $1.77 
D)  $2.52 
E)  $2.56

Question 2

Which one of the following is the primary purpose of a protective put?

Accepted Answer

A)  profit from an expected future increase in the underlying stock's value 
B)  guarantee a higher return than is possible from just owning the underlying security 
C)  offset the risk associated with a decrease in the value of the underlying asset 
D)  receipt of the option premium 
E)  increase in potential rate of return due to increase in risk 
A)  profit from an expected future increase in the underlying stock's value 
B)  guarantee a higher return than is possible from just owning the underlying security 
C)  offset the risk associated with a decrease in the value of the underlying asset 
D)  receipt of the option premium 
E)  increase in potential rate of return due to increase in risk

Question 3

Which one of the following applies to a naked call?

Accepted Answer

A)  unlimited potential profits 
B)  unlimited potential losses 
C)  sale of a put on a stock you do not own 
D)  sale of a call on a stock you currently own 
E)  purchase of a call on a stock you do not own 
A)  unlimited potential profits 
B)  unlimited potential losses 
C)  sale of a put on a stock you do not own 
D)  sale of a call on a stock you currently own 
E)  purchase of a call on a stock you do not own

Question 4

What is the total option premium you will receive if you sell 4 May $27.50 calls on Texas Instruments?

Accepted Answer

A)  $90 
B)  $850 
C)  $1,640 
D)  $2,170 
E)  $3,375 
A)  $90 
B)  $850 
C)  $1,640 
D)  $2,170 
E)  $3,375

Question 5

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 6

A European 3-month call has a strike price of $35.The stock price is currently $34.30.What is the lower price bound on this call?

Accepted Answer

A)  $0.00 
B)  $0.30 
C)  $0.70 
D)  $1.00 
E)  $1.30 
A)  $0.00 
B)  $0.30 
C)  $0.70 
D)  $1.00 
E)  $1.30

Question 7

You wrote a covered call with a strike price of $35 and an option premium of $1.10.Assume the stock price is $34 a share currently and that it falls to $32 a share and remains at that price until the option expires.As a result,you will:

Accepted Answer

A)  lose an amount equal to the option premium. 
B)  lose the option premium but get to keep the stock. 
C)  keep both your stock and the option premium. 
D)  keep the option premium but lose your shares of stock. 
E)  lose both your stock and the option premium. 
A)  lose an amount equal to the option premium. 
B)  lose the option premium but get to keep the stock. 
C)  keep both your stock and the option premium. 
D)  keep the option premium but lose your shares of stock. 
E)  lose both your stock and the option premium.

Question 8

Which one of the following is the upper price bound for the intrinsic value of a European put option on a stock?

Accepted Answer

A)  0 
B)  strike price 
C)  stock price 
D)  Max (S - K, 0) 
E)  Max (K - S, 0) 
A)  0 
B)  strike price 
C)  stock price 
D)  Max (S - K, 0) 
E)  Max (K - S, 0)

Question 9

A 3-month put has a strike price of $45.00 and an option premium of $1.10.The underlying stock is selling for $45.80 per share.What is the time value of the put?

Accepted Answer

A)  $0.00 
B)  $0.60 
C)  $0.90 
D)  $1.60 
E)  $1.90 
A)  $0.00 
B)  $0.60 
C)  $0.90 
D)  $1.60 
E)  $1.90

Question 10

Which one of the following is a bear call spread?

Accepted Answer

A)  buying a $30 call and selling a $35 call on the same stock 
B)  selling a $30 call and buying a $30 call on the same stock 
C)  buying a $30 call and selling a $25 call on the same stock 
D)  selling a $30 call and buying a $35 put 
E)  buying a $30 call and selling a $35 put 
A)  buying a $30 call and selling a $35 call on the same stock 
B)  selling a $30 call and buying a $30 call on the same stock 
C)  buying a $30 call and selling a $25 call on the same stock 
D)  selling a $30 call and buying a $35 put 
E)  buying a $30 call and selling a $35 put

Question 11

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)  $0.00 
B)  $0.70 
C)  $1.40 
D)  $2.10 
E)  $2.80 
A)  $0.00 
B)  $0.70 
C)  $1.40 
D)  $2.10 
E)  $2.80

Question 12

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 percent and the market rate is 8 percent.What is the option premium on a 3-month put with a $20 strike price? Assume the options are European style.

Accepted Answer

A)  $0.00 
B)  $0.15 
C)  $0.35 
D)  $0.55 
E)  $0.75 
A)  $0.00 
B)  $0.15 
C)  $0.35 
D)  $0.55 
E)  $0.75

Question 13

You bought a put with a strike price of $35.The current stock price is $33.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 14

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 15

Selling a call option on stock which you own is referred to as which one of the following strategies?

Accepted Answer

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

Question 16

What is the current price per underlying share if you wish to buy a June $32.50 call option on General Electric stock?

Accepted Answer

A)  $0.68 
B)  $0.70 
C)  $0.73 
D)  $1.60 
E)  $1.62 
A)  $0.68 
B)  $0.70 
C)  $0.73 
D)  $1.60 
E)  $1.62

Question 17

Gerold purchased 3 put option contracts at an option premium of $0.95 and a strike price of $40.At expiration,the stock price was $42.25 per share.What is his percentage return?

Accepted Answer

A)  -100 percent 
B)  0 percent 
C)  15.79 percent 
D)  21.62 percent 
E)  31.58 percent 
A)  -100 percent 
B)  0 percent 
C)  15.79 percent 
D)  21.62 percent 
E)  31.58 percent

Question 18

You own two SPX put options with a strike of 1,600.What is the payoff at maturity for this option contract if the S&P 500 index is 1,622?

Accepted Answer

A)  -$2,200 
B)  -$22 
C)  $0 
D)  $22 
E)  $2,200 
A)  -$2,200 
B)  -$22 
C)  $0 
D)  $22 
E)  $2,200

Question 19

Which one of the following combinations creates an in-the-money option?

Accepted Answer

A)  underlying stock price is less than the strike price of a call 
B)  underlying stock price is $18 and the put has an exercise price of $15 
C)  underlying stock price is $22 and the call has an exercise price of $25 
D)  put strike price exceeds the underlying stock price 
E)  put price is equal to the call price 
A)  underlying stock price is less than the strike price of a call 
B)  underlying stock price is $18 and the put has an exercise price of $15 
C)  underlying stock price is $22 and the call has an exercise price of $25 
D)  put strike price exceeds the underlying stock price 
E)  put price is equal to the call price

Question 20

Which of the following issue 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

How much option premium per share will you receive if you sell a September $34 put on General Electric stock?

Which one of the following is the primary purpose of a protective put?

Which one of the following applies to a naked call?

What is the total option premium you will receive if you sell 4 May $27.50 calls on Texas Instruments?

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

A European 3-month call has a strike price of $35.The stock price is currently $34.30.What is the lower price bound on this call?

You wrote a covered call with a strike price of $35 and an option premium of $1.10.Assume the stock price is $34 a share currently and that it falls to $32 a share and remains at that price until the option expires.As a result,you will:

Which one of the following is the upper price bound for the intrinsic value of a European put option on a stock?

A 3-month put has a strike price of $45.00 and an option premium of $1.10.The underlying stock is selling for $45.80 per share.What is the time value of the put?

Which one of the following is a bear call spread?

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?

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 percent and the market rate is 8 percent.What is the option premium on a 3-month put with a $20 strike price? Assume the options are European style.

You bought a put with a strike price of $35.The current stock price is $33.What is the current payoff value of this option?

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

Selling a call option on stock which you own is referred to as which one of the following strategies?

What is the current price per underlying share if you wish to buy a June $32.50 call option on General Electric stock?

Gerold purchased 3 put option contracts at an option premium of $0.95 and a strike price of $40.At expiration,the stock price was $42.25 per share.What is his percentage return?

You own two SPX put options with a strike of 1,600.What is the payoff at maturity for this option contract if the S&P 500 index is 1,622?

Which one of the following combinations creates an in-the-money option?

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

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

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

Projecting Cash Flow and Earnings

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Exam 15: Stock Options

How much option premium per share will you receive if you sell a September $34 put on General Electric stock?

Which one of the following is the primary purpose of a protective put?

Which one of the following applies to a naked call?

What is the total option premium you will receive if you sell 4 May $27.50 calls on Texas Instruments?

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

A European 3-month call has a strike price of $35.The stock price is currently $34.30.What is the lower price bound on this call?

You wrote a covered call with a strike price of $35 and an option premium of $1.10.Assume the stock price is $34 a share currently and that it falls to $32 a share and remains at that price until the option expires.As a result,you will:

Which one of the following is the upper price bound for the intrinsic value of a European put option on a stock?

A 3-month put has a strike price of $45.00 and an option premium of $1.10.The underlying stock is selling for $45.80 per share.What is the time value of the put?

Which one of the following is a bear call spread?

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?

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 percent and the market rate is 8 percent.What is the option premium on a 3-month put with a $20 strike price? Assume the options are European style.

You bought a put with a strike price of $35.The current stock price is $33.What is the current payoff value of this option?

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

Selling a call option on stock which you own is referred to as which one of the following strategies?

What is the current price per underlying share if you wish to buy a June $32.50 call option on General Electric stock?

Gerold purchased 3 put option contracts at an option premium of $0.95 and a strike price of $40.At expiration,the stock price was $42.25 per share.What is his percentage return?

You own two SPX put options with a strike of 1,600.What is the payoff at maturity for this option contract if the S&P 500 index is 1,622?

Which one of the following combinations creates an in-the-money option?

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

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

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

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters