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Exam 14: Options

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Question 41

Multiple Choice

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Put-call parity is the relationship between the _________ of a call and a put for a European style option with identical exercise date and strike price.

A) market price
B) intrinsic value
C) break-even price
D) premium value
E) expiration value

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Question 42

Multiple Choice

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You purchase 5 put option contracts with an option premium of $2.64 and a strike price of $60. If the stock price at expiration is $51.12, what is your percentage return?

A) 116%
B) 42%
C) 164%
D) 236%
E) 183%

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Question 43

Multiple Choice

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When you write a covered call, you:

Employee stock options

The price of a stock is $40. There are both call and put options on this stock. Both options have an exercise price of $40 and expire in two months. The market return is 10% and the risk-free rate is 4%. Given this, you know the

You have purchased one SXO put option with a strike price of 1,350. You have also written one SXO put option with the same maturity date at a strike price of 1,300. At maturity, what is your total payoff if the S&P Canada 60 index is 1,290?

A security whose value is based on the value of another security is called a _________ security.

A(n) _________ option gives the owner the right, but not the obligation, to sell an asset within the option period.

The maximum

A stock is currently selling for $32 a share. A call option on the stock is available for $3.40 with a strike price of $30 and three months to maturity. The risk-free rate is 4% and the market rate is 11%. What is the price of a 3-month put option with the same strike and expiration? Assume the options are European style.

If a call option holder elects to buy the underlying stock for the previously specified price they are said to "________" the option.

An option that would not yield a profit if exercised now is called a(n) _________ option.

A credit default swap acts like _______ for fixed-income assets.

$\begin{array}{|r|l|r|r|r|r|r|r|}\hline \text { Quote } & \text { Symbol }& \text { Last }&\text { Chg } &\text { Bid } & \text { Ask } &\text { Vol } &\text { Open } \\&&&&&&&\text {Int}\\\hline 1 & \text { F120218C00004000 } & 8.83 & 0.00 & 8.75 & 8.85 & 17 & 19 \\\hline 2 & \text { F120218C00005000 } & 7.40 & 0.00 & 7.75 & 7.80 & 20 & 34 \\\hline 3 & \text { F120218C00006000 } & 6.82 & +0.37 & 6.75 & 6.80 & 12 & 26 \\\hline 4 & \text { F120218C00007000 } & 5.80 & +0.05 & 5.75 & 5.80 & 10 & 51 \\\hline 5 & \text { F120218C00008000 } & 4.45 & 0.00 & 4.75 & 4.85 & 5 & 45 \\\hline\end{array}$ -When do the options in this chain expire?

You write 5 put option contracts with a premium of $4.85 and a strike price of $80. What is your profit if the stock price at expiration is $78.13?

The most critical assumption of put-call parity is that

You purchase 5 call option contracts on ABC stock with a price of $3.26 and a strike price of $45. At expiration, the stock price is $51.24. What is your payoff?

Which of the following has the potential for the greatest loss?

You find a call and a put with the same strike price and exercise date. The price of the put is greater than the price of the call. You know that:

Which of the following is an income producing strategy?