Question 1

The bid price is the price paid to buy an option from a market maker.

Accepted Answer

A) True 
 B)False  False

Question 2

A market maker is an options trader who buys and sells options off of the exchange floor.

Accepted Answer

A) True 
 B)False  False

Question 3

A market maker always avoids the cost of the bid-ask spread.

Accepted Answer

A) True 
 B)False  False

Question 4

Exercise limits are restrictions on the number of options that can be exercised by an investor in a given day or series of days.

Accepted Answer

A) True 
 B)False

Question 5

A put option increases in value when the stock price decreases.

Accepted Answer

A) True 
 B)False

Question 6

The option price is also referred to as the

Accepted Answer

A)  strike 
B)  spread 
C)  premium 
D)  fee 
E)  none of the above 
A)  strike 
B)  spread 
C)  premium 
D)  fee 
E)  none of the above

Question 7

Position limits are restrictions on the number of transactions an investor can execute on a given day.

Accepted Answer

A) True 
 B)False

Question 8

Offsetting an over-the-counter option contract cancels both contracts.

Accepted Answer

A) True 
 B)False

Question 9

The number of options acquired when one contract is purchased on an exchange is

Accepted Answer

A)  1 
B)  5 
C)  100 
D)  500 
E)  8,000 
A)  1 
B)  5 
C)  100 
D)  500 
E)  8,000

Question 10

What amount must a call writer pay if a cash-settled index call is exercised?

Accepted Answer

A)  difference between the index level and the exercise price 
B)  exercise price 
C)  difference between the exercise price and the index level 
D)  index level 
E)  none of the above 
A)  difference between the index level and the exercise price 
B)  exercise price 
C)  difference between the exercise price and the index level 
D)  index level 
E)  none of the above

Question 11

An order that specifies a maximum price to pay if buying is a

Accepted Answer

A)  stop order 
B)  market order 
C)  limit order 
D)  all or none order 
E)  none of the above 
A)  stop order 
B)  market order 
C)  limit order 
D)  all or none order 
E)  none of the above

Question 12

Option traders incur which of the following types of costs?

Accepted Answer

A)  margin requirements 
B)  taxes 
C)  stock trading commissions 
D)  a and b 
E)  a, b and c 
A)  margin requirements 
B)  taxes 
C)  stock trading commissions 
D)  a and b 
E)  a, b and c

Question 13

All of the options on Microsoft comprise an option class.

Accepted Answer

A) True 
 B)False

Question 14

The exchange with the largest share of the options market is the

Accepted Answer

A)  American Stock Exchange 
B)  Boston Options Exchange 
C)  Chicago Board Options Exchange 
D)  Pacific Stock Exchange 
E)  Philadelphia Stock Exchange 
A)  American Stock Exchange 
B)  Boston Options Exchange 
C)  Chicago Board Options Exchange 
D)  Pacific Stock Exchange 
E)  Philadelphia Stock Exchange

Question 15

The AT&T October puts are an option series.

Accepted Answer

A) True 
 B)False

Question 16

Suppose you hold a call option. The stock price has recently been increasing-making your call option more valuable. Through what process might you take advantage of the liquid nature of the options market?

Accepted Answer

A)  offsetting order 
B)  contract reconciliation 
C)  mark to market order 
D)  settling up 
E)  none of the above 
A)  offsetting order 
B)  contract reconciliation 
C)  mark to market order 
D)  settling up 
E)  none of the above

Question 17

Most investors close their positions by exercising their options.

Accepted Answer

A) True 
 B)False

Question 18

Options are traded on which of the following exchanges?

Accepted Answer

A)  NYSE Amex 
B)  NYSE Euronext (Arca) 
C)  Chicago Board Options Exchange 
D)  International Securities Exchange 
E)  all of the above 
A)  NYSE Amex 
B)  NYSE Euronext (Arca) 
C)  Chicago Board Options Exchange 
D)  International Securities Exchange 
E)  all of the above

Question 19

Again, on the CBOE, option tables represent each option with a series of letters and number, such as, MSFT\12B17\20.0. The middle letter represents the calendar month and whether it is a call or put.

Accepted Answer

A) True 
 B)False

Question 20

The exercise price is also called the striking price.

Accepted Answer

A) True 
 B)False

The bid price is the price paid to buy an option from a market maker.

A market maker is an options trader who buys and sells options off of the exchange floor.

A market maker always avoids the cost of the bid-ask spread.

Exercise limits are restrictions on the number of options that can be exercised by an investor in a given day or series of days.

A put option increases in value when the stock price decreases.

The option price is also referred to as the

Position limits are restrictions on the number of transactions an investor can execute on a given day.

Offsetting an over-the-counter option contract cancels both contracts.

The number of options acquired when one contract is purchased on an exchange is

What amount must a call writer pay if a cash-settled index call is exercised?

An order that specifies a maximum price to pay if buying is a

Option traders incur which of the following types of costs?

All of the options on Microsoft comprise an option class.

The exchange with the largest share of the options market is the

The AT&T October puts are an option series.

Suppose you hold a call option. The stock price has recently been increasing-making your call option more valuable. Through what process might you take advantage of the liquid nature of the options market?

Most investors close their positions by exercising their options.

Options are traded on which of the following exchanges?

Again, on the CBOE, option tables represent each option with a series of letters and number, such as, MSFT\12B17\20.0. The middle letter represents the calendar month and whether it is a call or put.

The exercise price is also called the striking price.

Introduction

Principles of Option Pricing

Option Pricing Models: The Binomial Model

Option Pricing Models: The Black-Scholes-Merton Model

Basic Option Strategies

Advanced Option Strategies

Structure of Forward and Futures Markets

Principles of Pricing Forwards, Futures and Options on Futures

Futures Arbitrage Strategies

Forward and Futures Hedging, Spread, and Target Strategies

Swaps

Interest Rate Forwards and Options

Advanced Derivatives and Strategies

Financial Risk Management Techniques and Appplications

Managing Risk in an Organization

Filters

Exam 2: Structure of Options Markets

The bid price is the price paid to buy an option from a market maker.

A market maker is an options trader who buys and sells options off of the exchange floor.

A market maker always avoids the cost of the bid-ask spread.

Exercise limits are restrictions on the number of options that can be exercised by an investor in a given day or series of days.

A put option increases in value when the stock price decreases.

The option price is also referred to as the

Position limits are restrictions on the number of transactions an investor can execute on a given day.

Offsetting an over-the-counter option contract cancels both contracts.

The number of options acquired when one contract is purchased on an exchange is

What amount must a call writer pay if a cash-settled index call is exercised?

An order that specifies a maximum price to pay if buying is a

Option traders incur which of the following types of costs?

All of the options on Microsoft comprise an option class.

The exchange with the largest share of the options market is the

The AT&T October puts are an option series.

Suppose you hold a call option. The stock price has recently been increasing-making your call option more valuable. Through what process might you take advantage of the liquid nature of the options market?

Most investors close their positions by exercising their options.

Options are traded on which of the following exchanges?

Again, on the CBOE, option tables represent each option with a series of letters and number, such as, MSFT\12B17\20.0. The middle letter represents the calendar month and whether it is a call or put.

The exercise price is also called the striking price.

Introduction

Principles of Option Pricing

Option Pricing Models: The Binomial Model

Option Pricing Models: The Black-Scholes-Merton Model

Basic Option Strategies

Advanced Option Strategies

Structure of Forward and Futures Markets

Principles of Pricing Forwards, Futures and Options on Futures

Futures Arbitrage Strategies

Forward and Futures Hedging, Spread, and Target Strategies

Swaps

Interest Rate Forwards and Options

Advanced Derivatives and Strategies

Financial Risk Management Techniques and Appplications

Managing Risk in an Organization

Filters