Exam 15: Options Markets

You purchase a call option on a stock. The profit at contract maturity of the option position is ________, where X equals the option's strike price, S_T is the stock price at contract expiration, and C₀ is the original purchase price of the option.

At contract maturity the value of a call option is ________, where X equals the option's strike price and ST is the stock price at contract expiration.

In 1973, trading of standardized options on a national exchange started on the ________.

Advantages of exchange-traded options over OTC options include all but which one of the following?

You sell one Huge-Packing August 50 call contract and sell one Huge-Packing August 50 put contract. The call premium is $1.25 and the put premium is $4.50. Your strategy will pay off only if the stock price is ________ in August.

An option with a payoff that depends on the average price of the underlying asset during at least some portion of the life of the option is called ________ option.

The common stock of the Avalon Corporation has been trading in a narrow range around $40 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $40 is $3, and a call with the same expiration date and exercise price sells for $4. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration?

An American put option gives its holder the right to ________.

A covered call strategy benefits from what environment?

You buy a call option on Summit Corp. with an exercise price of $40 and an expiration date in September, and you write a call option on Summit Corp. with an exercise price of $40 and an expiration date in October. This strategy is called a ________.

You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes: Suppose you establish a bullish money spread with the puts. In June the stock's price turns out to be $52. Ignoring commissions, the net profit on your position is ________.

Exchange-traded stock options expire on the ________ of the expiration month.

You write one MBI July 120 call contract (equaling 100 shares) for a premium of $4. You hold the option until the expiration date, when MBI stock sells for $121 per share. You will realize a ________ on the investment.

The writer of a put option ________.

Which one of the statements about margin requirements on option positions is not correct?

Which of the following expressions represents the value of a call option to its holder on the expiration date?

A time spread may be executed by ________.

The initial maturities of most exchange-traded options are generally ________.

Exercise prices for listed stock options usually occur in increments of ________ and bracket the current stock price.

The common stock of the Avalon Corporation has been trading in a narrow range around $40 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $40 is $3, and a call with the same expiration date and exercise price sells for $4. Suppose you write a strap and the stock price winds up to be $42 at contract expiration. What was your net profit on the strap?