Exam 20: Options Markets: Introduction

Suppose you purchase one WFM May 100 call contract at $5 and write one WFM May 105 call contract at $2. The maximum potential profit of your strategy is ________, if both options are exercised.

The price that the writer of a put option receives to sell the option is called the

You purchase one JNJ 75 call option for a premium of $3.Ignoring transaction costs, the break-even price of the position is

The current market price of a share of MSI stock is $24.If a call option on this stock has a strike price of $24, the call

Suppose that you purchased a call option on the S&P 100 Index.The option has an exercise price of 1,680, and the index is now at 1,720.What will happen when you exercise the option?

To adjust for stock splits

According to the put-call parity theorem, the value of a European put option on a nondividend paying stock is equal to

Buyers of call options __________ required to post margin deposits, and sellers of put options __________ required to post margin deposits.

Consider a one-year maturity call option and a one-year put option on the same stock, both with striking price $100.If the risk-free rate is 5%, the stock price is $103, and the put sells for $7.50, what should be the price of the call?

The put-call parity theorem

An American put option can be exercised

The price that the buyer of a call option pays for the underlying asset if she executes her option is called the

The value of a stock put option is positively related to

The price that the writer of a call option receives for the underlying asset if the buyer executes her option is called the

A European call option can be exercised

You buy one Home Depot June 60 call contract and one June 60 put contract.The call premium is $5 and the put premium is $3. Your strategy is called

Top Flight Stock currently sells for $53.A one-year call option with strike price of $58 sells for $10, and the risk-free interest rate is 5.5%.What is the price of a one-year put with strike price of $58?

The following price quotations were taken from the Wall Street Journal. The premium on one February 90 call contract is

The following price quotations on WFM were taken from the Wall Street Journal. The premium on one WFM February 90 call contract is

All else equal, call option values are higher