Question 1

Anna bought a $40 April call and a $40 April put on the same underlying stock.This strategy is referred to as which one of the following?

Accepted Answer

A) bull spread 
B) bear spread 
C) parity play 
D) short straddle 
E) long straddle 
A) bull spread 
B) bear spread 
C) parity play 
D) short straddle 
E) long straddle

Question 2

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 3

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 4

The change in the option symbol quotation system was driven by which of the following?
I.Advances in technology
II.Increase in the number and type of option products
III.Difficulty in applying the old system to NASDAQ stocks
IV.Difficulty in applying the system to complicated option products

Accepted Answer

A) I, II, III, and IV 
B) II, III, and IV 
C) I, II, and IV 
D) II and III 
E) I, II and III 
A) I, II, III, and IV 
B) II, III, and IV 
C) I, II, and IV 
D) II and III 
E) I, II and III

Question 5

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 6

A stock is currently selling for $26.50.A 3-month put option with a strike price of $30 has an option premium of $4.05.The risk-free rate is 2.5 percent and the market rate is 9.75 percent.What is the option premium on a 2-month call with a $30 strike price? Assume the options are European style.

Accepted Answer

A) $0.00 
B) $0.33 
C) $0.41 
D) $0.67 
E) $0.73 
A) $0.00 
B) $0.33 
C) $0.41 
D) $0.67 
E) $0.73

Question 7

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 8

You own one SPX call option with a strike of 1,400.What is the payoff at maturity for this option contract if the S&P 500 index is 1,414?

Accepted Answer

A) $0 
B) $14 
C) $140 
D) $1,400 
E) $14,000 
A) $0 
B) $14 
C) $140 
D) $1,400 
E) $14,000

Question 9

Which one of the following is a bear call spread?

Accepted Answer

A) buying a $20 call and selling a $25 call on the same stock 
B) selling a $20 call and buying a $20 call on the same stock 
C) buying a $20 call and selling a $15 call on the same stock 
D) selling a $20 call and buying a $25 put 
E) buying a $20 call and selling a $25 put 
A) buying a $20 call and selling a $25 call on the same stock 
B) selling a $20 call and buying a $20 call on the same stock 
C) buying a $20 call and selling a $15 call on the same stock 
D) selling a $20 call and buying a $25 put 
E) buying a $20 call and selling a $25 put

Question 10

A list of available option contracts and their prices for a particular security listed in order of strike price and maturity date is referred to as which one of the following?

Accepted Answer

A) value chain 
B) intrinsic list 
C) option chain 
D) strike list 
E) exercise price display 
A) value chain 
B) intrinsic list 
C) option chain 
D) strike list 
E) exercise price display

Question 11

What is the total amount you will receive if you sell 10 June $27.50 puts on Texas Instruments?

Accepted Answer

A) unknown 
B) $70 
C) $100 
D) $4,050 
E) $4,300 
A) unknown 
B) $70 
C) $100 
D) $4,050 
E) $4,300

Question 12

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 13

A 6-month put has a strike price of $40.The underlying stock's price is $38.25.What is the intrinsic value of this put?

Accepted Answer

A) $0.00 
B) $0.90 
C) $1.75 
D) $2.30 
E) $3.60 
A) $0.00 
B) $0.90 
C) $1.75 
D) $2.30 
E) $3.60

Question 14

SLK stock is selling for $28 a share.A $30 call on this stock is priced at $2.What is your maximum profit and maximum loss if you buy the stock and write the call?
 How does this compare to your maximum profit and loss if you write the call but do not purchase the stock?
Answer will vary

Accepted Answer

To answer this question, we need to anal

Question 15

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 16

A European call has a strike price of $37.50.The underlying stock's price is $38.20.What is the lower price bound of this call?

Accepted Answer

A) $0.00 
B) $0.30 
C) $0.50 
D) $0.70 
E) $1.00 
A) $0.00 
B) $0.30 
C) $0.50 
D) $0.70 
E) $1.00

Question 17

Which of the following characteristics are correct regarding the old style option quotation system?
I.The system is known as OPRA - the Options Price Reporting Authority code
II.The system has 3 data elements
III.The system has 21 characters
IV.The system has 5 characters
V.The system is known as the OCC Series Key
VI.The root symbol is the underlying stock's ticker symbol

Accepted Answer

A) I, II, III, and VI 
B) II, III, IV, and V 
C) I, II, and IV 
D) II, III, V, and VI 
E) III, V, and VI 
A) I, II, III, and VI 
B) II, III, IV, and V 
C) I, II, and IV 
D) II, III, V, and VI 
E) III, V, and VI

Question 18

Explain how options can be used to manage risk.Provide an example using a call option and another example using a put option.

Accepted Answer

Options can be used to manage risk in a

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

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

Anna bought a $40 April call and a $40 April put on the same underlying stock.This strategy is referred to as which one of the following?

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

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

The change in the option symbol quotation system was driven by which of the following? I.Advances in technology II.Increase in the number and type of option products III.Difficulty in applying the old system to NASDAQ stocks IV.Difficulty in applying the system to complicated option products

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?

A stock is currently selling for $26.50.A 3-month put option with a strike price of $30 has an option premium of $4.05.The risk-free rate is 2.5 percent and the market rate is 9.75 percent.What is the option premium on a 2-month call with a $30 strike price? Assume the options are European style.

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

You own one SPX call option with a strike of 1,400.What is the payoff at maturity for this option contract if the S&P 500 index is 1,414?

Which one of the following is a bear call spread?

A list of available option contracts and their prices for a particular security listed in order of strike price and maturity date is referred to as which one of the following?

What is the total amount you will receive if you sell 10 June $27.50 puts on Texas Instruments?

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?

A 6-month put has a strike price of $40.The underlying stock's price is $38.25.What is the intrinsic value of this put?

SLK stock is selling for $28 a share.A $30 call on this stock is priced at $2.What is your maximum profit and maximum loss if you buy the stock and write the call? How does this compare to your maximum profit and loss if you write the call but do not purchase the stock? Answer will vary

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

A European call has a strike price of $37.50.The underlying stock's price is $38.20.What is the lower price bound of this call?

Explain how options can be used to manage risk.Provide an example using a call option and another example using a put option.

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?

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

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

Anna bought a $40 April call and a $40 April put on the same underlying stock.This strategy is referred to as which one of the following?

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

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

The change in the option symbol quotation system was driven by which of the following? I.Advances in technology II.Increase in the number and type of option products III.Difficulty in applying the old system to NASDAQ stocks IV.Difficulty in applying the system to complicated option products

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?

A stock is currently selling for $26.50.A 3-month put option with a strike price of $30 has an option premium of $4.05.The risk-free rate is 2.5 percent and the market rate is 9.75 percent.What is the option premium on a 2-month call with a $30 strike price? Assume the options are European style.

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

You own one SPX call option with a strike of 1,400.What is the payoff at maturity for this option contract if the S&P 500 index is 1,414?

Which one of the following is a bear call spread?

A list of available option contracts and their prices for a particular security listed in order of strike price and maturity date is referred to as which one of the following?

What is the total amount you will receive if you sell 10 June $27.50 puts on Texas Instruments?

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?

A 6-month put has a strike price of $40.The underlying stock's price is $38.25.What is the intrinsic value of this put?

SLK stock is selling for $28 a share.A $30 call on this stock is priced at $2.What is your maximum profit and maximum loss if you buy the stock and write the call? How does this compare to your maximum profit and loss if you write the call but do not purchase the stock? Answer will vary

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

A European call has a strike price of $37.50.The underlying stock's price is $38.20.What is the lower price bound of this call?

Explain how options can be used to manage risk.Provide an example using a call option and another example using a put option.

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?

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

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