Derivatives

The largest markets for derivatives based on notional outstandings are

Which of the following is a valid completion of the sentence-"An American option ..."?

The writer of a put option on a stock

The premium of an option is

Which of the following statements is true of an option's payoff?

If your directional view is that stock prices are going to fall,you should

If you believe that stock prices are going to fall for sure,then given a fixed amount of capital,you should

If you expect stock volatility to fall but have no particular view of direction,then you should

If you expect stock volatility to rise but have no particular view of direction,then you should

A call option with a strike of K = 100 is purchased at a premium of $4.The stock price at maturity is $105.The net payoff of the option is

You have a portfolio with long positions in both puts and calls.The volatility in the market rises.

You anticipate that volatility will increase sharply and the stock price will fall.Select the most profitable of the following portfolios to hold,given your views:

For a call and a put written on the same underlying but at at possibly different strike prices,

You have a long position in a stock that you purchased for $100,and a short position in a put option on the same stock at strike K = 100.At maturity the stock price is $95,and you liquidate your stock and option positions.Your gross payoff (cash flow)is

You have a long position in a stock that you purchased for $100,a short position in a call and a long position in a put,both at strike K = 100.At maturity the stock price is S_T,and you liquidate your stock and option positions.Your gross payoff (cash flow)is

You sold a call option at strike 105 for a price of $3 and sold a put option at strike 95 for a price of $2,both options with the same maturity.In what range of stock prices at maturity will you make money or not lose (on your net payoff)?

You have $100 to invest.You can invest it in one of two alternatives.The first is to invest it in a stock that is trading for $100.The second is to buy three-month 100-strike calls on the stock that are currently trading at $4 each.You expect the stock price to appreciate with a maximum price after three months of $110.What is the maximum return on investment you can generate using stock and options?

You have $100 to invest in a stock (or options on the stock).The stock is trading for $100.The three-month 100-strike calls on the stock are trading at $4 each.The minimum stock price you expect to see after three months is $60.What is the worst case return on investment you can possibly end up with using stock and/or options?

You hold the following portfolio: a long position in a European call option on gold with a strike of $975 per oz,a short position in a European put option on gold with a strike of $975 per oz,and a short forward position in gold with a delivery price of $1,000 per oz.All three contracts expire in one month.The value of your position is

A seller of a naked put option will want the value of the underlying asset to _______ and a buyer of a naked call option will want the value of the underlying asset to ______.