Question 1

LEAPS are a special type of option

Accepted Answer

A)  that must be exercised within six months. 
B)  that can only be exercised on the expiration date. 
C)  that cannot be exercised for at least a year after it is is purchased. 
D)  that may have an expiration date as long as three years. 
A)  that must be exercised within six months. 
B)  that can only be exercised on the expiration date. 
C)  that cannot be exercised for at least a year after it is is purchased. 
D)  that may have an expiration date as long as three years.

Question 2

Which one of the following was the first listed exchange for stock options in the United States?

Accepted Answer

A)  Stock Index Board 
B)  Philadelphia Board of Trade 
C)  New York Stock Exchange 
D)  Chicago Board Options Exchange 
A)  Stock Index Board 
B)  Philadelphia Board of Trade 
C)  New York Stock Exchange 
D)  Chicago Board Options Exchange

Question 3

Options premiums tend to be smaller as the time to expiration increases.

Accepted Answer

A) True 
 B)False

Question 4

Anthony is confident that shares of SolarTech will greatly increase in value, but thinks that it may be a year or more before that happens. He should buy

Accepted Answer

A)  ETF calls. 
B)  LEAP puts. 
C)  LEAP calls. 
D)  Index calls. 
A)  ETF calls. 
B)  LEAP puts. 
C)  LEAP calls. 
D)  Index calls.

Question 5

The buyer of a call option has the right to any dividends paid after the option was purchased, but only if the option is exercised.

Accepted Answer

A) True 
 B)False

Question 6

Paul writes a put with a strike price of $35. The most he could lose by writing the put is
$3,500.

Accepted Answer

A) True 
 B)False

Question 7

The most important factor affecting the market price of a put or call is the

Accepted Answer

A)  market interest rate. 
B)  expiration date. 
C)  price behavior of the underlying common stock. 
D)  price behavior of the corresponding warrant. 
A)  market interest rate. 
B)  expiration date. 
C)  price behavior of the underlying common stock. 
D)  price behavior of the corresponding warrant.

Question 8

The value of a put increases as the price of the underlying security rises.

Accepted Answer

A) True 
 B)False

Question 9

American style options can only be exercised on their expiration dates.

Accepted Answer

A) True 
 B)False

Question 10

Explain how an investor can use a stock market index option to hedge a portfolio of common stocks.

Accepted Answer

An investor can buy enough ind

Question 11

The writer of a put or call is the

Accepted Answer

A)  the institution that brings buyers and sellers of an option together in a transaction. 
B)  can limit risk by letting the option expire unexercised. 
C)  party who agrees to buy or sell the underlying stock if the option holder chooses to exercise the option. 
D)  party who guarantees that the terms of the option will be satisfied. 
A)  the institution that brings buyers and sellers of an option together in a transaction. 
B)  can limit risk by letting the option expire unexercised. 
C)  party who agrees to buy or sell the underlying stock if the option holder chooses to exercise the option. 
D)  party who guarantees that the terms of the option will be satisfied.

Question 12

Warrants are options, often attached to bond issues ,to make the bonds more attractive to investors.

Accepted Answer

A) True 
 B)False

Question 13

Writing covered calls may result in a profit to the writer even if the stock price does not change.

Accepted Answer

A) True 
 B)False

Question 14

NZMA stock is currently selling for $128. Which of the following options is "in-the- money"?

Accepted Answer

A)  March 130 call 
B)  February 125 call 
C)  March 125 put 
D)  February 100 put 
A)  March 130 call 
B)  February 125 call 
C)  March 125 put 
D)  February 100 put

Question 15

A put option has a strike price of $32. The current price of the stock is $34. The put option is said to be "in-the-money."

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements concerning Long-term Equity AnticiPation Securities (LEAPS) is correct?

Accepted Answer

A)  LEAPS are traded solely in the over-the-counter market. 
B)  LEAPS are options that are available only on individual common stocks. 
C)  LEAPS typically have a higher quoted price than that of a regular option. 
D)  LEAPS generally have a longer life than a warrant. 
A)  LEAPS are traded solely in the over-the-counter market. 
B)  LEAPS are options that are available only on individual common stocks. 
C)  LEAPS typically have a higher quoted price than that of a regular option. 
D)  LEAPS generally have a longer life than a warrant.

Question 17

Fred bought 600 shares of Edgewood stock at a price of $19. The stock is currently selling for $53 a share. To protect his profits, Fred should buy

Accepted Answer

A)  600 call options with a strike price of $55. 
B)  600 put options with a strike price of $50. 
C)  6 call options with a strike price of $55. 
D)  6 put options with a strike price of $50. 
A)  600 call options with a strike price of $55. 
B)  600 put options with a strike price of $50. 
C)  6 call options with a strike price of $55. 
D)  6 put options with a strike price of $50.

Question 18

A put has fundamental value as long as

Accepted Answer

A)  the market price of the underlying financial asset has a positive value. 
B)  the market price of the underlying financial asset is less than the strike price. 
C)  the strike price of the put is greater than the time premium of the put. 
D)  the strike price of the put is less than the market value of the underlying asset. 
A)  the market price of the underlying financial asset has a positive value. 
B)  the market price of the underlying financial asset is less than the strike price. 
C)  the strike price of the put is greater than the time premium of the put. 
D)  the strike price of the put is less than the market value of the underlying asset.

Question 19

What is the intrinsic value of a call with a strike price of $40 if the market price of the underlying stock is $44? The call's ask price $540.

Accepted Answer

A)  -$400 
B)  -$140 
C)  $940 
D)  $400 
A)  -$400 
B)  -$140 
C)  $940 
D)  $400

Question 20

European options can only be exercised on the expiration date but can be sold to another investor on any trading day.

Accepted Answer

A) True 
 B)False

LEAPS are a special type of option

Which one of the following was the first listed exchange for stock options in the United States?

Options premiums tend to be smaller as the time to expiration increases.

Anthony is confident that shares of SolarTech will greatly increase in value, but thinks that it may be a year or more before that happens. He should buy

The buyer of a call option has the right to any dividends paid after the option was purchased, but only if the option is exercised.

Paul writes a put with a strike price of $35. The most he could lose by writing the put is $3,500.

The most important factor affecting the market price of a put or call is the

The value of a put increases as the price of the underlying security rises.

American style options can only be exercised on their expiration dates.

Explain how an investor can use a stock market index option to hedge a portfolio of common stocks.

The writer of a put or call is the

Warrants are options, often attached to bond issues ,to make the bonds more attractive to investors.

Writing covered calls may result in a profit to the writer even if the stock price does not change.

NZMA stock is currently selling for $128. Which of the following options is "in-the- money"?

A put option has a strike price of $32. The current price of the stock is $34. The put option is said to be "in-the-money."

Which of the following statements concerning Long-term Equity AnticiPation Securities (LEAPS) is correct?

Fred bought 600 shares of Edgewood stock at a price of $19. The stock is currently selling for $53 a share. To protect his profits, Fred should buy

A put has fundamental value as long as

What is the intrinsic value of a call with a strike price of $40 if the market price of the underlying stock is $44? The call's ask price $540.

European options can only be exercised on the expiration date but can be sold to another investor on any trading day.

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Futures Markets and Securities

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Exam 14: Options: Puts and Calls

LEAPS are a special type of option

Which one of the following was the first listed exchange for stock options in the United States?

Options premiums tend to be smaller as the time to expiration increases.

Anthony is confident that shares of SolarTech will greatly increase in value, but thinks that it may be a year or more before that happens. He should buy

The buyer of a call option has the right to any dividends paid after the option was purchased, but only if the option is exercised.

Paul writes a put with a strike price of $35. The most he could lose by writing the put is $3,500.

The most important factor affecting the market price of a put or call is the

The value of a put increases as the price of the underlying security rises.

American style options can only be exercised on their expiration dates.

Explain how an investor can use a stock market index option to hedge a portfolio of common stocks.

The writer of a put or call is the

Warrants are options, often attached to bond issues ,to make the bonds more attractive to investors.

Writing covered calls may result in a profit to the writer even if the stock price does not change.

NZMA stock is currently selling for $128. Which of the following options is "in-the- money"?

A put option has a strike price of $32. The current price of the stock is $34. The put option is said to be "in-the-money."

Which of the following statements concerning Long-term Equity AnticiPation Securities (LEAPS) is correct?

Fred bought 600 shares of Edgewood stock at a price of $19. The stock is currently selling for $53 a share. To protect his profits, Fred should buy

A put has fundamental value as long as

What is the intrinsic value of a call with a strike price of $40 if the market price of the underlying stock is $44? The call's ask price $540.

European options can only be exercised on the expiration date but can be sold to another investor on any trading day.

The Investment Environment

Securities Markets and Transactions

Investment Information and Securities Transactions

Return and Risk

Modern Portfolio Concepts

Common Stocks

Analyzing Common Stocks

Stock Valuation

Market Efficiency and Behavioral Finance

Fixed-Income Securities

Bond Valuation

Mutual Funds and Exchange-Traded Funds

Managing Your Own Portfolio

Futures Markets and Securities

Filters