The purchase of an American Style option contract is: Option premium is:
The price of the option which is paid by the buyer to the seller at the time of the transaction.
Which of the following investors will purchase stock if the option is exercised?
I. Owner of a call
II. Owner of a put
III. Writer of a call
IV. Writer of a put
I and IV
As the underlying stock price increases, the premium of a call option will generally:
Increase
Who issues a U.S. listed option?
The Options Clearing Corp
A call is “in-the-money” when the market price of the underlying stock is:
Higher than the strike price
XYZ stock is trading at $25.75 and XYZ Jul 25 calls are trading at a premium of $2. What is the time value of the Jul 25 calls?
$0
$75
$125 – This one
$200
Which of the following options strategies are bearish?
I. Buyer of a call
II. Writer of a call
III. Buyer of a put
IV. Writer of a put
II and III
Which two of the following options are “in-the-money”?
I. PQR 35 put when PQR is trading at $32
II. PQR 35 call when PQR is trading at $32
III. PQR 15 call when PQR is trading at $15
IV. PQR 15 call when PQR is trading at $18
I and IV
An investor sells an ABC Mar 35 call. To establish a straddle, he would also:
Sell an ABC Mar 35 put
All of the following are possible objectives of call buyers EXCEPT:
Hedging a long stock position against falling prices
Which of the following is the riskiest option strategy?
Uncovered call writing
When an index option is exercised, cash settlement takes place how many business days after exercise?
One
The S&P 100 Index and the AMEX Major Market Index are examples of:
Broad-based indexes
On May 4th, an investor writes one S&P 100 Jan 185 put at 6. His maximum potential gain on this position is:
$600
An investor writes an AMEX Major Market Index 250 call at 13. The market closes that day at $262.34. The investor will break even on his short call if, on the expiration date, the index closes at:
$263
If a holder of a call option tenders an exercise notice on the day prior to the ex-dividend date for an ordinary cash dividend, he will be:
Entitled to the dividend.
If an investor does not anticipate that the price of a stock will change and wished to take an option position, he would most likely:
Sell an uncovered straddle
Upon exercise of a call option, the holder of the call will realize a profit if the price of the underlying:
Exceeds the exercise price plus the premium paid
If buying listed call options instead of the underlying stock, which of the following is NOT an advantage?
The call has intrinsic value in addition to the time value which gradually diminishes.
The holder of a long put will realize a profit upon the exercise of the option if the price of the underlying stock:
Falls below the exercise price minus the premium paid
All of the following generally result in a profit to a naked call writer EXCEPT:
The call is exercised and the price of the underlying is greater than the exercise price.
In early April, an investor buys 1 XYZ Oct 60 call for $9 and sells 1 XYZ Jul 70 call for $4. If the investor buys back the Jul call for $1 and sells the Oct call for $12, what will the pretax profit or loss be?
$600 profit
With no other positions, an investor sells short 100 XYZ at $40 and sells 1 XYZ Oct 40 put at $5. If the put is exercised when the market price of the stock is $35 and the stock received is used to cover the short position, what would the investor’s profit or loss be?
$500 profit If a Customer seeks to liquidate an open position at or near the prevailing market, the following is correct: In a locked limit market, a fast moving market, an illiquid market, or if the system experiences failure or delay, a Customer may not be able to close out an open position at or near the prevailing market.