Question 1

The profit of an index option is determined by:

Accepted Answer

A) the total value of the increase in the index. 
B) the total value of the option. 
C) the size of the premium. 
D) More than one above 
A) the total value of the increase in the index. 
B) the total value of the option. 
C) the size of the premium. 
D) More than one above

Question 2

The multiplier for the S&P 500 futures contract is:

Accepted Answer

A) 5. 
B) 10. 
C) 100. 
D) 250. 
E) 500. 
A) 5. 
B) 10. 
C) 100. 
D) 250. 
E) 500.

Question 3

Which of the following statements about the "basis" of stock index futures is true?

Accepted Answer

A) It is the difference between the futures price and the value of the actual underlying index 
B) Negative basis is generally considered to foretell a declining market 
C) The basis reflects market changes instantaneously,while the actual underlying index moves more slowly 
D) All of the above are true 
A) It is the difference between the futures price and the value of the actual underlying index 
B) Negative basis is generally considered to foretell a declining market 
C) The basis reflects market changes instantaneously,while the actual underlying index moves more slowly 
D) All of the above are true

Question 4

An investor bought a March S&P 500 Index futures contract in December for $1,490.05.After six months the contract value went up to $1,539.95.The contract has a multiplier of 250.With an initial margin of $20,000,what is the percent return on margin?

Accepted Answer

A) 62.38% 
B) 60.32% 
C) 7.70% 
D) 7.45% 
E) 6.32% 
A) 62.38% 
B) 60.32% 
C) 7.70% 
D) 7.45% 
E) 6.32%

Question 5

You buy an S&P 500 Index Call Option for $15.The strike price is $1,250.If the index closes at $1,290,what is your total profit?

Accepted Answer

The answer of You buy an S&P 500 Index Call...

Question 6

Stock specialists and OTC dealers hedge their positions with stock index futures:

Accepted Answer

A) to profit from major market movements. 
B) to reduce market risk on his or her inventory. 
C) to reduce the unsystematic risk on the stocks in his or her inventory. 
D) More than one of the above 
A) to profit from major market movements. 
B) to reduce market risk on his or her inventory. 
C) to reduce the unsystematic risk on the stocks in his or her inventory. 
D) More than one of the above

Question 7

If an investor can prove that he is hedging a long position,the margin requirement will be less.

Accepted Answer

A) True 
 B)False

Question 8

With the purchase of stock options and stock index options,an investor's maximum loss is her premium on the contract.

Accepted Answer

A) True 
 B)False

Question 9

The market for stock index futures began in February of 1982,when the NYSE began trading futures on the Dow Jones Industrial Average.

Accepted Answer

A) True 
 B)False

Question 10

The settle price shown in a stock index futures table is the:

Accepted Answer

A) highest price the contract hit during the day. 
B) closing price for the contract at the end of the day. 
C) price for the contract only for the last day of the contract. 
D) None of the above are true 
A) highest price the contract hit during the day. 
B) closing price for the contract at the end of the day. 
C) price for the contract only for the last day of the contract. 
D) None of the above are true

Question 11

An investor bought a March S&P 500 Index futures contract in December for $1,490.05.After six months the contract value went down to $1,466.00.The contract has a multiplier of 250.With an initial margin of $20,000,and a $16,000 maintenance margin requirement,would there be a call for more margin?

Accepted Answer

A) No,the account would have an excess of $2,012.50 
B) Yes,an additional $3,677.19 would be required 
C) No,the account would have exactly enough cash for margin 
D) Yes,an additional $2,012.50 would be required 
E) No,the account would have an excess of $3,677.19 
A) No,the account would have an excess of $2,012.50 
B) Yes,an additional $3,677.19 would be required 
C) No,the account would have exactly enough cash for margin 
D) Yes,an additional $2,012.50 would be required 
E) No,the account would have an excess of $3,677.19

Question 12

Stock index futures and options allow an investor to:

Accepted Answer

A) select a security from any of those included in the index. 
B) gain or lose from the movement of the index. 
C) trade any of the securities in the index. 
D) None of the above 
A) select a security from any of those included in the index. 
B) gain or lose from the movement of the index. 
C) trade any of the securities in the index. 
D) None of the above

Question 13

If you have a put option on a stock index,you hope the market will:

Accepted Answer

A) go up. 
B) go down. 
C) remain unchanged. 
D) None of the above 
A) go up. 
B) go down. 
C) remain unchanged. 
D) None of the above

Question 14

When the portfolio manager wants to hedge a stock portfolio using an index futures contract,he or she must know: 1)the total dollar value of the portfolio,2)the current index futures price,and 3)the relative volatility of the portfolio to the market.

Accepted Answer

A) True 
 B)False

Question 15

Futures contracts exist for the:

Accepted Answer

A) Dow Jones Industrial Average. 
B) NASDAQ 100 Stock Index. 
C) S&P 500. 
D) All of the above 
A) Dow Jones Industrial Average. 
B) NASDAQ 100 Stock Index. 
C) S&P 500. 
D) All of the above

Question 16

Options on stock index futures may settle on a cash basis or exercise the option to obtain the futures contract.

Accepted Answer

A) True 
 B)False

Question 17

Program trading calls for:

Accepted Answer

A) computer-based trigger points for large trades. 
B) the use of computer programs to measure performance. 
C) the use of only call options. 
D) All of the above 
A) computer-based trigger points for large trades. 
B) the use of computer programs to measure performance. 
C) the use of only call options. 
D) All of the above

Question 18

The multiplier for the Dow Jones Industrial Average futures contract is:

Accepted Answer

A) 5. 
B) 10. 
C) 100. 
D) 250. 
E) 500. 
A) 5. 
B) 10. 
C) 100. 
D) 250. 
E) 500.

Question 19

Stock index futures and options are sometimes referred to as derivatives.

Accepted Answer

A) True 
 B)False

Question 20

An investor earns a profit on a put option when:

Accepted Answer

A) the increase in the index is greater than the premium paid. 
B) the index decreases. 
C) the decrease in the index is greater than the premium paid. 
D) None of the above 
A) the increase in the index is greater than the premium paid. 
B) the index decreases. 
C) the decrease in the index is greater than the premium paid. 
D) None of the above

Exam 14: Stock Index Futures and Options

The profit of an index option is determined by:

The multiplier for the S&P 500 futures contract is:

Which of the following statements about the "basis" of stock index futures is true?

An investor bought a March S&P 500 Index futures contract in December for $1,490.05.After six months the contract value went up to $1,539.95.The contract has a multiplier of 250.With an initial margin of $20,000,what is the percent return on margin?

You buy an S&P 500 Index Call Option for $15.The strike price is $1,250.If the index closes at $1,290,what is your total profit?

Stock specialists and OTC dealers hedge their positions with stock index futures:

If an investor can prove that he is hedging a long position,the margin requirement will be less.

With the purchase of stock options and stock index options,an investor's maximum loss is her premium on the contract.

The market for stock index futures began in February of 1982,when the NYSE began trading futures on the Dow Jones Industrial Average.

The settle price shown in a stock index futures table is the:

An investor bought a March S&P 500 Index futures contract in December for $1,490.05.After six months the contract value went down to $1,466.00.The contract has a multiplier of 250.With an initial margin of $20,000,and a $16,000 maintenance margin requirement,would there be a call for more margin?

Stock index futures and options allow an investor to:

If you have a put option on a stock index,you hope the market will:

When the portfolio manager wants to hedge a stock portfolio using an index futures contract,he or she must know: 1)the total dollar value of the portfolio,2)the current index futures price,and 3)the relative volatility of the portfolio to the market.

Futures contracts exist for the:

Options on stock index futures may settle on a cash basis or exercise the option to obtain the futures contract.

Program trading calls for:

The multiplier for the Dow Jones Industrial Average futures contract is:

Stock index futures and options are sometimes referred to as derivatives.

An investor earns a profit on a put option when:

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