Question 1

A 6-month call has a strike price of $30.The underlying stock is priced at $31.80 and the option premium on the call is $2.40.What is the per share time value of the call?

Accepted Answer

A) $0.00 
B) $0.60 
C) $1.40 
D) $2.80 
E) $3.60

Question 2

You wrote a put with a strike price of $20 and a premium of $1.Draw a graph depicting your profits or losses for stock prices ranging from $0 to $40.Be sure to completely label your graph.

Accepted Answer

The answer of You wrote a put with a strike...

Question 3

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

Question 4

By definition,stock index options would include an option on which one of the following underlying assets?

Accepted Answer

A) gold 
B) corn 
C) U.S. dollar 
D) S&P 500 
E) U.S. Treasury bill

Question 5

You purchased a put with a strike price of $37.5 and an option premium of $0.45.You simultaneously bought the stock at a price of $36 a share.What is your profit per share on these transactions if the stock price at expiration is $33.50?

Accepted Answer

A) -$1.15 
B) -$0.15 
C) $0.15 
D) $0.75 
E) $1.05

Question 6

You currently own 300 shares of Microsoft stock.If you purchase options on this stock to protect against future declines in the price of the stock you are implementing which one of the following?

Accepted Answer

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

Question 7

Which one of the following distinguishes an option as an American style option?

Accepted Answer

A) option that grants its holder the right to purchase at the strike price 
B) option that grants its holder the right to sell at the strike price 
C) option that obligates its holder to sell at the strike price 
D) option that can be exercised at any time prior to expiration 
E) option that can only be exercised at expiration

Question 8

You own 6 put option contracts on JL Industrial stock.You paid an option premium of $0.75 for a strike price of $42.50.On the option expiration date,the stock was selling for $41.00 a share.What is your percentage return?

Accepted Answer

A) -100 percent 
B) -18.75 percent 
C) 51.26 percent 
D) 78.75 percent 
E) 100 percent

Question 9

You own 100 shares of Deltona stock which is currently worth $43 a share.You just paid an option premium of $0.85 to buy one put contract 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) $40.85 
C) $42.15 
D) $43.00 
E) $43.85

Question 10

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

Question 11

Tim purchased 5 put option contracts on Western Fields stock.The strike price was $35 and the option premium was $0.55.At expiration,the stock was selling for $35.75.What is the payoff on the option contracts?

Accepted Answer

A) -$60 
B) -$30 
C) $0 
D) $30 
E) $60

Question 12

Which of the following characteristics are correct regarding the new 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

Question 13

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)

Question 14

Kim Lee purchased 6 put option contracts on Eastern Imports stock at a strike price of $47.50.The option premium was $0.65.At expiration,the stock was valued at $44.90 a share.What is her percentage return?

Accepted Answer

A) -100 percent 
B) 0 percent 
C) 5.47 percent 
D) 32.82 percent 
E) 300 percent

Question 15

Josh owns 2 call options on Foster Glass stock.The exercise price is $47.50 and the stock price at expiration is $49.01.What is the total payoff on the option contracts?

Accepted Answer

A) -$0.00 
B) -$3.02 
C) $3.02 
D) $30.20 
E) $302.00

Question 16

Katie purchased 6 call options on Atlas Co.stock with a strike price of $40.00.On the expiration date,the stock was priced at $38.95 a share.What is the total payoff on the option contracts?

Accepted Answer

A) -$220 
B) -$55 
C) $0 
D) $2.20 
E) $55

Question 17

A decrease in which one of the following will increase the intrinsic value of a put option?

Accepted Answer

A) strike price 
B) exercise price 
C) option premium 
D) time value 
E) underlying stock price

Question 18

You own one SPX put option with a strike of 1,300.What is the payoff at maturity for this option contract if the S&P 500 index is 1,322?

Accepted Answer

A) -$3,600 
B) -$36 
C) $0 
D) $36 
E) $3,600

Question 19

A 3-month put has a strike price of $47.50 and an option premium of $1.40.The underlying stock is selling for $46.70 per share.What is the time value of the put?

Accepted Answer

A) $0.00 
B) $0.60 
C) $0.70 
D) $1.20 
E) $1.40

Question 20

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

Exam 15: Stock Options