Question 1

To maximize profits on a call purchase,one should hold the position for as short a time as possible.

Accepted Answer

A) True 
 B)False

Question 2

What is the maximum profit from the transaction described in Question 6 if the position is held to expiration?

Accepted Answer

A) $3,289 
B) $289 
C) infinity 
D) $2,711 
E) none of the above 
A) $3,289 
B) $289 
C) infinity 
D) $2,711 
E) none of the above

Question 3

As long as puts are available for trading,there is little justification for constructing synthetic puts.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following investors may be obligated to buy stock?

Accepted Answer

A) covered call writer 
B) call buyer 
C) put writer 
D) protective put buyer 
E) none of the above 
A) covered call writer 
B) call buyer 
C) put writer 
D) protective put buyer 
E) none of the above

Question 5

The difference in profit from an actual put and a synthetic put is

Accepted Answer

A) X 
B) ST - X 
C) X - ST 
D) ST + X(1 + r)-T 
E) none of the above 
A) X 
B) ST - X 
C) X - ST 
D) ST + X(1 + r)-T 
E) none of the above

Question 6

Any strategy consisting of only long options will lose money if the stock price stays the same.

Accepted Answer

A) True 
 B)False

Question 7

Suppose the investor constructed a covered call.At expiration the stock price is $27.What is the investor's profit?

Accepted Answer

A) $589 
B) $289 
C) $2,989 
D) $2,711 
E) none of the above 
A) $589 
B) $289 
C) $2,989 
D) $2,711 
E) none of the above

Question 8

An investor can construct a synthetic put by buying a call and selling short a stock.

Accepted Answer

A) True 
 B)False

Question 9

Early exercise imposes a risk to all but one of the following transactions.

Accepted Answer

A) a short call 
B) a short put 
C) a protective put 
D) an uncovered call 
E) none of the above 
A) a short call 
B) a short put 
C) a protective put 
D) an uncovered call 
E) none of the above

Question 10

Which of the following is equivalent to a synthetic call?

Accepted Answer

A) a long stock and a short put position 
B) a long put and a long stock position 
C) a long put and a short risk-free bond position 
D) a long stock and a short risk-free bond position 
E) none of the above 
A) a long stock and a short put position 
B) a long put and a long stock position 
C) a long put and a short risk-free bond position 
D) a long stock and a short risk-free bond position 
E) none of the above

To maximize profits on a call purchase,one should hold the position for as short a time as possible.

What is the maximum profit from the transaction described in Question 6 if the position is held to expiration?

As long as puts are available for trading,there is little justification for constructing synthetic puts.

Which of the following investors may be obligated to buy stock?

The difference in profit from an actual put and a synthetic put is

Any strategy consisting of only long options will lose money if the stock price stays the same.

Suppose the investor constructed a covered call.At expiration the stock price is $27.What is the investor's profit?

An investor can construct a synthetic put by buying a call and selling short a stock.

Early exercise imposes a risk to all but one of the following transactions.

Which of the following is equivalent to a synthetic call?

Introduction

Structure of Options Markets

Principles of Option Pricing

Option Pricing Models: the Binomial Model

Option Pricing Models: the Black-Scholes-Merton Model

Advanced Option Strategies

The 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 Applications

Managing Risk in an Organization

Filters

Exam 6: Basic Option Strategies

To maximize profits on a call purchase,one should hold the position for as short a time as possible.

What is the maximum profit from the transaction described in Question 6 if the position is held to expiration?

As long as puts are available for trading,there is little justification for constructing synthetic puts.

Which of the following investors may be obligated to buy stock?

The difference in profit from an actual put and a synthetic put is

Any strategy consisting of only long options will lose money if the stock price stays the same.

Suppose the investor constructed a covered call.At expiration the stock price is $27.What is the investor's profit?

An investor can construct a synthetic put by buying a call and selling short a stock.

Early exercise imposes a risk to all but one of the following transactions.

Which of the following is equivalent to a synthetic call?

Introduction

Structure of Options Markets

Principles of Option Pricing

Option Pricing Models: the Binomial Model

Option Pricing Models: the Black-Scholes-Merton Model

Advanced Option Strategies

The 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 Applications

Managing Risk in an Organization

Filters