Question 1

Using the BOPM to analyze a call option on a monthly basis would result in a total number of possible year-end stock prices of

Accepted Answer

A)   12.
B)   2.
C)   24.
D)   13.E) A) and B)
F) A) and C)

Question 2

A call option specifies all but

Accepted Answer

A)   the date the option expires.
B)   the striking price.
C)   the intrinsic value of the shares.
D)   the company whose shares can be purchased.E) A) and B)
F) All of the above

Question 3

A put option is out of the money if the

Accepted Answer

A)   expiration date is more than six months.
B)   market price is greater than the exercise price.
C)   the stock declares a dividend.
D)   market and exercise prices are equal.E) A) and B)
F) A) and C)

Question 4

You can buy a $100 share that will be worth either $120 or $70 in one year, a $100 bond that will be worth $107 in one year, or a call option for the stock for $10. Developing a replicating portfolio with the BOPM, the proportion of the portfolio in the stock should be

Accepted Answer

A)   40%.
B)   20%.
C)   60%.
D)   100%.E) A) and B)
F) C) and D)

Question 5

At the CBOE, options trading is

Accepted Answer

A)   through open outcry.
B)   from a closed order book.
C)   done only at the hour mark.
D)   all done through computer matching.E) C) and D)
F) All of the above

Question 6

The term ____ indicates that the option writer does not own the underlying stock on which the option is written.

Accepted Answer

A)   off-cover
B)   naked
C)   covered call writing
D)   European optionE) A) and B)
F) B) and D)

Question 7

One limitation to the Black-Scholes model is that strictly speaking it is only applicable to options that do not

Accepted Answer

A)   have an expiration date
B)   pay dividends over the life of the option
C)   display implied volatility
D)   have an intrinsic valueE) All of the above
F) None of the above

Question 8

You own a call option with a strike price of $40 and a stock market price of $46. The intrinsic value of the call is

Accepted Answer

A)   $ 6
B)   $40.
C)   $46.
D)   -$6. 
E)  $ 0.F) C) and E)
G) A) and B)

Question 9

A ___ option gives the buyer the right to purchase a specific number of shares of a specific company from the writer at a specific purchase price by a specific date.

Accepted Answer

A)   put
B)   call
C)   stock index
D)   swapE) A) and D)
F) A) and C)

Question 10

If an investor buys a call with a strike price of $90 and the underlying stock at the time of expiration is $96, what is her profit or loss per share if she paid the writer $4 a share?

Accepted Answer

A)   $2
B)   $1
C)   -$1
D)   -$2E) B) and C)
F) None of the above

Question 11

The writer of a naked call option needs to provide the brokerage firm with

Accepted Answer

A)   an amount based on the premium, strike price, and market value.
B)   the amount of the premium.
C)   nothing.
D)   100 shares of the underlying stock.E) All of the above
F) None of the above

Question 12

The Option Clearing Corporation created the ______ system to protect itself from the actions of the writers.

Accepted Answer

A)   margin
B)   commission
C)   order book
D)   option pricingE) A) and B)
F) A) and C)

Question 13

You write a naked put option of June 20, premium of $3 per share, market price per share of $21. Your margin requirement is

Accepted Answer

A)   $ 620.
B)   $2,000.
C)   $1,000.
D)   $ 100.E) B) and C)
F) A) and D)

Question 14

The purchaser of a call option feels that the stock will

Accepted Answer

A)   pay a large dividend.
B)   maintain a level price.
C)   have a drop in price.
D)   have a price rise.E) C) and D)
F) B) and D)

Question 15

The higher the amount of dividends a stock pays, the

Accepted Answer

A)   the lower its dividend yield.
B)   the higher the value of a call option.
C)   the value of a call will increase immediately after the ex-dividend day.
D)   the lower the value of a call option.E) All of the above
F) None of the above

Question 16

The margin requirements for index options are

Accepted Answer

A)   more than for individual stock put options.
B)   not required.
C)   based on Treasury bill rates.
D)   less than for individual stock options.DIFFICULTE) A) and B)
F) A) and C)

Question 17

Within an options listing, the letter r indicates the option

Accepted Answer

A)   also provides a rights offering.
B)   wasn't traded.
C)   does not require a premium
D)   is ex-dividend.E) All of the above
F) B) and C)

Question 18

Organized exchanges for options trading began in

Accepted Answer

A)   1945.
B)   1933.
C)   1973.
D)   1954.E) None of the above
F) B) and D)

Question 19

To determine a stock's implicit volatility involves

Accepted Answer

A)   using a 10-year history of Value-Line industry data.
B)   solve for the logarithm of the Wall Street Journal daily stock yields.
C)   taking the range of the option price divided by two.
D)   solving the Black-Scholes for the standard deviation.E) All of the above
F) A) and D)

Question 20

A put warrant gives the owner the right to

Accepted Answer

A)   sell future dividends.
B)   sell the index.
C)   sell a group of warrants.
D)   buy a specified stock.E) A) and C)
F) A) and B)

Exam 24: Options

To determine a stock's implicit volatility involves

Correct AnswerverifiedShow Answer

The Option Clearing Corporation created the ______ system to protect itself from the actions of the writers.

Correct AnswerverifiedShow Answer

Organized exchanges for options trading began in

Correct AnswerverifiedShow Answer

The term ____ indicates that the option writer does not own the underlying stock on which the option is written.

Correct AnswerverifiedShow Answer

You write a naked put option of June 20, premium of $3 per share, market price per share of $21. Your margin requirement is

Correct AnswerverifiedShow Answer

At the CBOE, options trading is

Correct AnswerverifiedShow Answer

Using the BOPM to analyze a call option on a monthly basis would result in a total number of possible year-end stock prices of

Correct AnswerverifiedShow Answer

The margin requirements for index options are

Correct AnswerverifiedShow Answer

The higher the amount of dividends a stock pays, the

Correct AnswerverifiedShow Answer

You can buy a $100 share that will be worth either $120 or $70 in one year, a $100 bond that will be worth $107 in one year, or a call option for the stock for $10. Developing a replicating portfolio with the BOPM, the proportion of the portfolio in the stock should be

Correct AnswerverifiedShow Answer

The purchaser of a call option feels that the stock will

Correct AnswerverifiedShow Answer

One limitation to the Black-Scholes model is that strictly speaking it is only applicable to options that do not

Correct AnswerverifiedShow Answer

A put option is out of the money if the

Correct AnswerverifiedShow Answer

You own a call option with a strike price of $40 and a stock market price of $46. The intrinsic value of the call is

Correct AnswerverifiedShow Answer

A call option specifies all but

Correct AnswerverifiedShow Answer

A put warrant gives the owner the right to

Correct AnswerverifiedShow Answer

The writer of a naked call option needs to provide the brokerage firm with

Correct AnswerverifiedShow Answer

If an investor buys a call with a strike price of $90 and the underlying stock at the time of expiration is $96, what is her profit or loss per share if she paid the writer $4 a share?

Correct AnswerverifiedShow Answer

A ___ option gives the buyer the right to purchase a specific number of shares of a specific company from the writer at a specific purchase price by a specific date.

Correct AnswerverifiedShow Answer

Within an options listing, the letter r indicates the option

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified