Derivatives

Business

Quiz 7 :
Options Markets

Quiz 7 :
Options Markets

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The largest markets for derivatives based on notional outstandings are
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B

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

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The writer of a put option on a stock
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D

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The premium of an option is
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Which of the following statements is true of an option's payoff?
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If your directional view is that stock prices are going to fall,you should
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If you believe that stock prices are going to fall for sure,then given a fixed amount of capital,you should
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If you expect stock volatility to fall but have no particular view of direction,then you should
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If you expect stock volatility to rise but have no particular view of direction,then you should
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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
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You have a portfolio with long positions in both puts and calls.The volatility in the market rises.
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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:
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For a call and a put written on the same underlying but at at possibly different strike prices,
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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
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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 ST,and you liquidate your stock and option positions.Your gross payoff (cash flow)is
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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)?
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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?
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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?
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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
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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 ______.
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