Question 1

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

Question 2

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

Question 3

Which one of the following options is in-the-money?

Accepted Answer

A) call with a $45 strike and an underlying stock price of $42 
B) put with a $35 strike and an underlying stock price of $36 
C) call with a $15 strike and an underlying stock price of $15 
D) put with a $45 strike and an underlying stock price of $42 
E) call with a $30 strike and an underlying stock price of $29

Question 4

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

Question 5

You own 300 shares of ABC stock.Which one of the following would allow you to receive an option premium in exchange for selling your shares in ABC at the strike price?

Accepted Answer

A) straddle 
B) long spread 
C) selling a put 
D) buying a call 
E) writing a covered call

Question 6

A call option with 6 months to expiration currently sells for $2.05.A put option with the same expiration sells for $0.60.The options are European style.The risk-free rate is 3.0 percent and the strike price of both options is $50.What is the current stock price?

Accepted Answer

A) $47.89 
B) $49.19 
C) $50.72 
D) $51.29 
E) $52.08

Question 7

A 4-month,$25 call option on Teller stock has an option premium of $0.25.The 4-month,$25 put option has an option premium of $0.80.The risk-free rate is 3 percent.The options are European-style.What is the price of Teller stock?

Accepted Answer

A) $24.20 
B) $24.53 
C) $24.62 
D) $25.97 
E) $26.08

Question 8

What is the total option premium you will receive if you sell 6 October $25 calls on Texas Instruments?

Accepted Answer

A) $80 
B) $350 
C) $695 
D) $4,170 
E) $4,375

Question 9

Which one of the following represents an arbitrage opportunity?

Accepted Answer

A) stock price of $18 and strike price of $20 
B) call price of $0.40 and put price of $0.40 
C) PCP-implied put price of $0.30 and call price of $0.28 
D) PCP-implied put price of $0.30 and put market price of $0.31 
E) PCP-implied call price of $0.20 and a put market price of $0.22

Question 10

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

Question 11

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

Question 12

Which one of the following is defined as the price at which an option will be exercised?

Accepted Answer

A) straddle 
B) spread 
C) strike 
D) market 
E) underlying

Question 13

You are buying the June call on General Electric stock at $0.19.What amount will you pay per share if you decide to exercise this option?

Accepted Answer

A) $32.50 
B) $32.69 
C) $33.81 
D) $34.00 
E) $34.19

Question 14

You bought a put with a strike price of $25.The current stock price is $23.What is the current payoff value of this option?

Accepted Answer

A) -$2 
B) -$1 
C) $0 
D) $1 
E) $2

Question 15

You own 4 put option contracts on ALZ stock.The contracts have a $17.50 strike price and you paid an option premium of $0.40.What is the break-even stock price?

Accepted Answer

A) $17.10 
B) $17.30 
C) $17.50 
D) $17.70 
E) $17.90

Question 16

Which one of the following is a bull 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 $25 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 17

You wrote a covered call with a strike price of $45 and an option premium of $1.10.Assume the stock price is $44 a share currently and that it falls to $42 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.

Question 18

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

Question 19

Which one of the following correctly defines the range of time values for a put option?

Accepted Answer

A) $0 to +$1 
B) -$1 to +$1 
C) ≤ $0 
D) ≥ $0 
E) ¹ $0

Question 20

A call option grants its owner which one of the following?

Accepted Answer

A) right to buy 
B) obligation to buy 
C) right to sell 
D) obligation to sell 
E) choice to either buy or sell

Exam 15: Stock Options