Question 1

Kathy implemented an option trading strategy consisting of two call options.This strategy is known as which one of the following?

Accepted Answer

A)  spread 
B)  straddle 
C)  split 
D)  combination 
E)  counteraction 
A)  spread 
B)  straddle 
C)  split 
D)  combination 
E)  counteraction

Question 2

A 3-month put has a strike price of $50.The underlying stock's price is $48.75.What is the intrinsic value of this put?

Accepted Answer

A)  $0.00 
B)  $0.90 
C)  $1.25 
D)  $2.30 
E)  $3.60 
A)  $0.00 
B)  $0.90 
C)  $1.25 
D)  $2.30 
E)  $3.60

Question 3

You own 5 put option contracts on JL Industrial stock.You paid an option premium of $1.15 for a strike price of $27.50.On the option expiration date,the stock was selling for $24.00 a share.What is your percentage return?

Accepted Answer

A)  -100 percent 
B)  -18.75 percent 
C)  71.26 percent 
D)  194.00 percent 
E)  204.00 percent 
A)  -100 percent 
B)  -18.75 percent 
C)  71.26 percent 
D)  194.00 percent 
E)  204.00 percent

Question 4

Consider both a European put and call that expire in December and have a strike price of $25.The no-arbitrage relationship between this put and call is referred to as which one of the following?

Accepted Answer

A)  intrinsic equilibrium 
B)  Euro-match 
C)  bull-call spread 
D)  butterfly spread 
E)  put-call parity 
A)  intrinsic equilibrium 
B)  Euro-match 
C)  bull-call spread 
D)  butterfly spread 
E)  put-call parity

Question 5

You own 300 shares of Delta stock which is currently worth $42 a share.You just paid an option premium of $0.70 to buy three put contracts on this stock with a strike price of $40.What is the maximum loss per share you are avoiding by purchasing the option contract?

Accepted Answer

A)  $40.00 
B)  $42.85 
C)  $44.15 
D)  $47.00 
E)  $53.85 
A)  $40.00 
B)  $42.85 
C)  $44.15 
D)  $47.00 
E)  $53.85

Question 6

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

Question 7

Which one of the following guarantees that the terms of an exchange-listed option contract are fulfilled when an option is exercised?

Accepted Answer

A)  Securities and Exchange Commission 
B)  Federal Reserve 
C)  New York Options Exchange 
D)  Options Clearing Corporation 
E)  Securities Investors Protection Corporation 
A)  Securities and Exchange Commission 
B)  Federal Reserve 
C)  New York Options Exchange 
D)  Options Clearing Corporation 
E)  Securities Investors Protection Corporation

Question 8

You purchased one SPX call option with a strike of 1,500.You wrote one SPX call option with the same maturity date and a strike of 1,450.At maturity,what is your payoff if the S&P 500 is at 1,475?

Accepted Answer

A)  -$2,500 
B)  -$250 
C)  $25 
D)  $250 
E)  $2,500 
A)  -$2,500 
B)  -$250 
C)  $25 
D)  $250 
E)  $2,500

Question 9

Which one of the following is a bull 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 $35 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 $35 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 10

You bought a call option with a strike price of $40.What is your total payoff on this option contract if the underlying stock is selling for $42.70 on the option expiration date?

Accepted Answer

A)  $3.00 
B)  $70.00 
C)  $133.00 
D)  $233.00 
E)  $270.00 
A)  $3.00 
B)  $70.00 
C)  $133.00 
D)  $233.00 
E)  $270.00

Question 11

The maximum option payoff from:

Accepted Answer

A)  writing a put is $0. 
B)  buying a put is $0. 
C)  writing a call is an unlimited profit. 
D)  buying a call is the strike price. 
E)  writing a call is the stock price. 
A)  writing a put is $0. 
B)  buying a put is $0. 
C)  writing a call is an unlimited profit. 
D)  buying a call is the strike price. 
E)  writing a call is the stock price.

Question 12

Callie purchased 3 call options with a $37.50 strike price and a call premium of $0.910.On the expiration date,the underlying stock was priced at $40.20 per share.What is her percentage return on this investment?

Accepted Answer

A)  -100 percent 
B)  70.45 percent 
C)  181.82 percent 
D)  200.00 percent 
E)  909.10 percent 
A)  -100 percent 
B)  70.45 percent 
C)  181.82 percent 
D)  200.00 percent 
E)  909.10 percent

Question 13

The value of an option is dependent upon the value of the underlying security.This relationship defines an option as which one of the following?

Accepted Answer

A)  equity security 
B)  fixed income security 
C)  derivative security 
D)  transfer security 
E)  dependent security 
A)  equity security 
B)  fixed income security 
C)  derivative security 
D)  transfer security 
E)  dependent security

Question 14

At what price will a dealer sell the Jun $34 put on General Electric stock?

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 15

A 4-month call has a strike price of $20.The current underlying stock price is $21.45.What is the intrinsic value of this call?

Accepted Answer

A)  $0.00 
B)  $0.48 
C)  $1.45 
D)  $3.90 
E)  $4.35 
A)  $0.00 
B)  $0.48 
C)  $1.45 
D)  $3.90 
E)  $4.35

Question 16

Which one of the following values is discounted in the put-call parity formula?

Accepted Answer

A)  call price 
B)  put price 
C)  stock price 
D)  strike price 
E)  option premium 
A)  call price 
B)  put price 
C)  stock price 
D)  strike price 
E)  option premium

Question 17

Russ paid a total of $75 to purchase 5 call options with a strike price of $17.50.What is the break-even stock price?

Accepted Answer

A)  $0.15 
B)  $0.30 
C)  $17.35 
D)  $17.65 
E)  $32.50 
A)  $0.15 
B)  $0.30 
C)  $17.35 
D)  $17.65 
E)  $32.50

Question 18

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 19

You purchased a call option with a $22.50 strike price and a call premium of $0.40.On the expiration date,the underlying stock was priced at $23.40 per share.What is the percentage return on your investment?

Accepted Answer

A)  -100 percent 
B)  0 percent 
C)  50 percent 
D)  125 percent 
E)  200 percent 
A)  -100 percent 
B)  0 percent 
C)  50 percent 
D)  125 percent 
E)  200 percent

Question 20

Rosalita purchased a put option with a strike price of $35.She paid a total of $140 for the contract.What is the break-even stock price?

Accepted Answer

A)  $31.40 
B)  $33.60 
C)  $38.00 
D)  $41.60 
E)  $42.80 
A)  $31.40 
B)  $33.60 
C)  $38.00 
D)  $41.60 
E)  $42.80

Kathy implemented an option trading strategy consisting of two call options.This strategy is known as which one of the following?

A 3-month put has a strike price of $50.The underlying stock's price is $48.75.What is the intrinsic value of this put?

You own 5 put option contracts on JL Industrial stock.You paid an option premium of $1.15 for a strike price of $27.50.On the option expiration date,the stock was selling for $24.00 a share.What is your percentage return?

Consider both a European put and call that expire in December and have a strike price of $25.The no-arbitrage relationship between this put and call is referred to as which one of the following?

You own 300 shares of Delta stock which is currently worth $42 a share.You just paid an option premium of $0.70 to buy three put contracts on this stock with a strike price of $40.What is the maximum loss per share you are avoiding by purchasing the option contract?

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

Which one of the following guarantees that the terms of an exchange-listed option contract are fulfilled when an option is exercised?

You purchased one SPX call option with a strike of 1,500.You wrote one SPX call option with the same maturity date and a strike of 1,450.At maturity,what is your payoff if the S&P 500 is at 1,475?

Which one of the following is a bull call spread?

You bought a call option with a strike price of $40.What is your total payoff on this option contract if the underlying stock is selling for $42.70 on the option expiration date?

The maximum option payoff from:

Callie purchased 3 call options with a $37.50 strike price and a call premium of $0.910.On the expiration date,the underlying stock was priced at $40.20 per share.What is her percentage return on this investment?

The value of an option is dependent upon the value of the underlying security.This relationship defines an option as which one of the following?

At what price will a dealer sell the Jun $34 put on General Electric stock?

A 4-month call has a strike price of $20.The current underlying stock price is $21.45.What is the intrinsic value of this call?

Which one of the following values is discounted in the put-call parity formula?

Russ paid a total of $75 to purchase 5 call options with a strike price of $17.50.What is the break-even stock price?

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?

You purchased a call option with a $22.50 strike price and a call premium of $0.40.On the expiration date,the underlying stock was priced at $23.40 per share.What is the percentage return on your investment?

Rosalita purchased a put option with a strike price of $35.She paid a total of $140 for the contract.What is the break-even stock price?

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

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Exam 15: Stock Options

Kathy implemented an option trading strategy consisting of two call options.This strategy is known as which one of the following?

A 3-month put has a strike price of $50.The underlying stock's price is $48.75.What is the intrinsic value of this put?

You own 5 put option contracts on JL Industrial stock.You paid an option premium of $1.15 for a strike price of $27.50.On the option expiration date,the stock was selling for $24.00 a share.What is your percentage return?

Consider both a European put and call that expire in December and have a strike price of $25.The no-arbitrage relationship between this put and call is referred to as which one of the following?

You own 300 shares of Delta stock which is currently worth $42 a share.You just paid an option premium of $0.70 to buy three put contracts on this stock with a strike price of $40.What is the maximum loss per share you are avoiding by purchasing the option contract?

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

Which one of the following guarantees that the terms of an exchange-listed option contract are fulfilled when an option is exercised?

You purchased one SPX call option with a strike of 1,500.You wrote one SPX call option with the same maturity date and a strike of 1,450.At maturity,what is your payoff if the S&P 500 is at 1,475?

Which one of the following is a bull call spread?

You bought a call option with a strike price of $40.What is your total payoff on this option contract if the underlying stock is selling for $42.70 on the option expiration date?

The maximum option payoff from:

Callie purchased 3 call options with a $37.50 strike price and a call premium of $0.910.On the expiration date,the underlying stock was priced at $40.20 per share.What is her percentage return on this investment?

The value of an option is dependent upon the value of the underlying security.This relationship defines an option as which one of the following?

At what price will a dealer sell the Jun $34 put on General Electric stock?

A 4-month call has a strike price of $20.The current underlying stock price is $21.45.What is the intrinsic value of this call?

Which one of the following values is discounted in the put-call parity formula?

Russ paid a total of $75 to purchase 5 call options with a strike price of $17.50.What is the break-even stock price?

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?

You purchased a call option with a $22.50 strike price and a call premium of $0.40.On the expiration date,the underlying stock was priced at $23.40 per share.What is the percentage return on your investment?

Rosalita purchased a put option with a strike price of $35.She paid a total of $140 for the contract.What is the break-even stock price?

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