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| 1 | |
The right to buy a stock at the strike price at any time prior to expiration is called a European call. |
| | A) | True |
| | B) | False |
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| 2 | |
One stock option contract covers 10 shares of stock. |
| | A) | True |
| | B) | False |
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| 3 | |
Option payoff diagrams consider the cost of the option contract. |
| | A) | True |
| | B) | False |
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| 4 | |
You have the right to sell 500 shares of OLE stock at $40 a share on a specific date three months from now. You own a(n): |
| | A) | American call. |
| | B) | American put. |
| | C) | European call. |
| | D) | European put. |
| | E) | block of OLE shares. |
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| 5 | |
Which of the following exchanges process option trades?- PHLX
- NYSE
- PSE
- CBOE
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| | A) | I and II only |
| | B) | III and IV only |
| | C) | II and IV only |
| | D) | I, II, and IV only |
| | E) | I, II, III, and IV |
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| 6 | |
Who issues the standardized option contracts which trade on the various exchanges? |
| | A) | CBOT |
| | B) | NYSE |
| | C) | OCC |
| | D) | CBOE |
| | E) | SEC |
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| 7 | |
You bought one 30 call option contract on SY stock at a premium of $.20. SY stock was selling at $30.25 when the option expired. What is the net profit or loss on your investment? |
| | A) | $0.05 |
| | B) | $0.25 |
| | C) | $5.00 |
| | D) | $7.50 |
| | E) | $10.00 |
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| 8 | |
A protective put is designed to: |
| | A) | increase the upside potential return. |
| | B) | offset a call position. |
| | C) | to sell a security you do not own. |
| | D) | create a profit without having to buy the underlying asset. |
| | E) | eliminate downside risk. |
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| 9 | |
The intrinsic value of a put option is equal to: |
| | A) | max [0, S − K]. |
| | B) | min [0, S −K]. |
| | C) | max [0, K − S]. |
| | D) | min [0, K − S]. |
| | E) | max [0, K + S]. |
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| 10 | |
Employee stock options (ESOs): |
| | A) | can be traded in the open market. |
| | B) | have an unlimited life. |
| | C) | have an up-front cost to the employer. |
| | D) | generally have no vesting period. |
| | E) | are generally forfeited if an employee leaves the company. |
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