Question 1

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 2

If the market maker will buy at 4 and sell at 4.50,the bid-ask spread is

Accepted Answer

A) 8.50 
B) 4.25 
C) 0.50 
D) 4.00 
E) none of the above 
A) 8.50 
B) 4.25 
C) 0.50 
D) 4.00 
E) none of the above C

Question 3

What are circuit breakers?

Accepted Answer

A) rules that stop trading when futures are about to expire 
B) a system that shuts down the exchange computer during periods of abnormal volume 
C) limits on the number of contracts that can be traded on high volume days 
D) rules that limit the number of contracts a speculator can hold 
E) none of the above 
A) rules that stop trading when futures are about to expire 
B) a system that shuts down the exchange computer during periods of abnormal volume 
C) limits on the number of contracts that can be traded on high volume days 
D) rules that limit the number of contracts a speculator can hold 
E) none of the above B

Question 4

An investor who owns a call option can close out the position by any of the following types of transactions except

Accepted Answer

A) exercise 
B) offset 
C) expiring out-of-the-money 
D) buying a put 
E) none of the above 
A) exercise 
B) offset 
C) expiring out-of-the-money 
D) buying a put 
E) none of the above

Question 5

Exercising a stock put option means the put seller must sell stock at the stated strike price.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Option commissions are set by the Chicago Board Options Exchange.

Accepted Answer

A) True 
 B)False

Question 8

The majority of derivatives exchanges in the U.S.are fully automated.

Accepted Answer

A) True 
 B)False

Question 9

CBOE option market makers are also called liquidity providers.

Accepted Answer

A) True 
 B)False

Question 10

Variation margin is which of the following?

Accepted Answer

A) margin deposited as a result of marking-to-market 
B) the difference in margin between hedger and speculator 
C) margin differences according to trading style 
D) margin set by the variability of a futures price 
E) none of the above 
A) margin deposited as a result of marking-to-market 
B) the difference in margin between hedger and speculator 
C) margin differences according to trading style 
D) margin set by the variability of a futures price 
E) none of the above

Question 11

Identify the true statement regarding the largest derivatives exchanges.

Accepted Answer

A) CME Group is one of the top five largest derivatives exchange,based on volume 
B) Intercontinental Exchange is one of the top five largest derivatives exchange,based on volume 
C) The volume of trading exceeded one billion on each of the top five derivatives exchanges 
D) Among the top 20 derivatives exchanges,several different continents are represented 
E) all of the above 
A) CME Group is one of the top five largest derivatives exchange,based on volume 
B) Intercontinental Exchange is one of the top five largest derivatives exchange,based on volume 
C) The volume of trading exceeded one billion on each of the top five derivatives exchanges 
D) Among the top 20 derivatives exchanges,several different continents are represented 
E) all of the above

Question 12

Which of the following organizations has the ultimate regulatory authority in the futures industry?

Accepted Answer

A) National Futures Association 
B) Commodity Futures Trading Commission 
C) Commodity Exchange Authority 
D) Securities and Exchange Commission 
E) none of the above 
A) National Futures Association 
B) Commodity Futures Trading Commission 
C) Commodity Exchange Authority 
D) Securities and Exchange Commission 
E) none of the above

Question 13

Which of the following contract terms is not set by the futures exchange?

Accepted Answer

A) the dates on which delivery can occur 
B) the expiration months 
C) the price 
D) the deliverable commodities 
E) the size of the contract 
A) the dates on which delivery can occur 
B) the expiration months 
C) the price 
D) the deliverable commodities 
E) the size of the contract

Question 14

The daily settlement procedure is a major similarity between futures contracts and forward contracts.

Accepted Answer

A) True 
 B)False

Question 15

The Options Clearing Corporation guarantees the obligations of traders on many options exchanges.

Accepted Answer

A) True 
 B)False

Question 16

Futures contracts are similar to forward contracts because they both represent a

Accepted Answer

A) True 
 B)False

Question 17

A futures contract covers 5000 pounds with a minimum price change of $0.01 is sold for $31.60 per pound.If the initial margin is $2,525 and the maintenance margin is $1,000,at what price would there be a margin call?

Accepted Answer

A) 31.91 
B) 32.11 
C) 31.29 
D) 31.09 
E) 31.80 
A) 31.91 
B) 32.11 
C) 31.29 
D) 31.09 
E) 31.80

Question 18

Individuals engaging in this type of trading strategy are characterized by their attempt to profit from guessing the direction of the market

Accepted Answer

A) hedgers 
B) spreaders 
C) speculators 
D) arbitraguers 
E) none of the above 
A) hedgers 
B) spreaders 
C) speculators 
D) arbitraguers 
E) none of the above

Question 19

An order placed by an investor for the broker to buy an option at the best available price is called a market order.

Accepted Answer

A) True 
 B)False

Question 20

A call option priced at $2 with a stock price of $30 and an exercise price of $35 allows the holder to buy the stock at

Accepted Answer

A) $2 
B) $32 
C) $33 
D) $35 
E) none of the above 
A) $2 
B) $32 
C) $33 
D) $35 
E) none of the above

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

If the market maker will buy at 4 and sell at 4.50,the bid-ask spread is

What are circuit breakers?

An investor who owns a call option can close out the position by any of the following types of transactions except

Exercising a stock put option means the put seller must sell stock at the stated strike price.

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

Option commissions are set by the Chicago Board Options Exchange.

The majority of derivatives exchanges in the U.S.are fully automated.

CBOE option market makers are also called liquidity providers.

Variation margin is which of the following?

Identify the true statement regarding the largest derivatives exchanges.

Which of the following organizations has the ultimate regulatory authority in the futures industry?

Which of the following contract terms is not set by the futures exchange?

The daily settlement procedure is a major similarity between futures contracts and forward contracts.

The Options Clearing Corporation guarantees the obligations of traders on many options exchanges.

Futures contracts are similar to forward contracts because they both represent a

A futures contract covers 5000 pounds with a minimum price change of $0.01 is sold for $31.60 per pound.If the initial margin is $2,525 and the maintenance margin is $1,000,at what price would there be a margin call?

Individuals engaging in this type of trading strategy are characterized by their attempt to profit from guessing the direction of the market

An order placed by an investor for the broker to buy an option at the best available price is called a market order.

A call option priced at $2 with a stock price of $30 and an exercise price of $35 allows the holder to buy the stock at

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

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

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

If the market maker will buy at 4 and sell at 4.50,the bid-ask spread is

What are circuit breakers?

An investor who owns a call option can close out the position by any of the following types of transactions except

Exercising a stock put option means the put seller must sell stock at the stated strike price.

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

Option commissions are set by the Chicago Board Options Exchange.

The majority of derivatives exchanges in the U.S.are fully automated.

CBOE option market makers are also called liquidity providers.

Variation margin is which of the following?

Identify the true statement regarding the largest derivatives exchanges.

Which of the following organizations has the ultimate regulatory authority in the futures industry?

Which of the following contract terms is not set by the futures exchange?

The daily settlement procedure is a major similarity between futures contracts and forward contracts.

The Options Clearing Corporation guarantees the obligations of traders on many options exchanges.

Futures contracts are similar to forward contracts because they both represent a

A futures contract covers 5000 pounds with a minimum price change of $0.01 is sold for $31.60 per pound.If the initial margin is $2,525 and the maintenance margin is $1,000,at what price would there be a margin call?

Individuals engaging in this type of trading strategy are characterized by their attempt to profit from guessing the direction of the market

An order placed by an investor for the broker to buy an option at the best available price is called a market order.

A call option priced at $2 with a stock price of $30 and an exercise price of $35 allows the holder to buy the stock at

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

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