Reading 70: Option Markets and Contracts LOSa习题精选 - Derivative Investments - 【CFA一级试题精选】 - CFA论坛

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发表于 2010-4-26 14:14 | 只看该作者

Which of the following statements concerning an American-style option is least accurate?

A)	It allows the holder the right to exercise before maturity of the option.

B)	They are only traded in the U.S.

C)	The predominant option type is American-style, rather than European-style.

American-style options are traded throughout the world. The “American” label simply identifies the option as having the right to be exercised before maturity. American-style options are the predominant type of options contract traded.

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12^#

发表于 2010-4-26 14:15 | 只看该作者

Which of the following statements about uncovered call options is least accurate?

A)	The loss potential to the writer is unlimited.

B)	The profit potential to the holder is unlimited.

C)	The most the writer can make is the premium plus the difference between the exercise price (X) and the stock price (S).

The most the writer can make is the premium. If the writer wrote a covered out of the money call, then the writer would make the premium plus the increase in the stock's price X-S.

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13^#

发表于 2010-4-26 14:15 | 只看该作者

A put option currently has an option premium of $3 and a strike price of $40. The market price of the stock is $42 at expiration. The expiration day value of the option is:

$0.

$2.

$5.

The expiration day value of the put is $0 because it is trading out-of the money.

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发表于 2010-4-26 14:15 | 只看该作者

What is the primary difference between an American and a European option?

A)	American and European options are never written on the same underlying asset.

B)	The European option can only be traded on overseas markets.

C)	The American option can be exercised at anytime on or before its expiration date.

American and European options are virtually identical, except exercising the European option is limited to its expiration date only. The American option can be exercised at anytime on or before its expiration date. For the exam, the key concept relating to this difference is the value of the American option must be equal or greater than the value of the corresponding European option, all else being equal.

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发表于 2010-4-26 14:16 | 只看该作者

Which of the following statements about European and American options is least accurate?

A)	European options offer more flexible trading opportunities for speculators.

B)	American options are far more common than European options.

C)	European options are easier to analyze and value than American options.

European options are less flexible for traders than American options because of the limitation on when they can be exercised, which is only on the expiration date. Traders gain more flexibility with American options that can be exercised at anytime on or before expiration.

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发表于 2010-4-26 14:16 | 只看该作者

Which of the following statements about moneyness is most accurate? When the stock price is:

A)	above the strike price, a put option is in-the-money.

B)	below the strike price, a call option is in-the-money.

C)	above the strike price, a put option is out-of-the-money.

When the stock price is above the strike price, a put option is out-of-the-money.
When the stock price is below the strike price, a call option is out-of-the-money.

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发表于 2010-4-26 14:16 | 只看该作者

A put option is “in-the-money” when:

A)	the stock price is lower than the exercise price of the option.

B)	there is no put option with a lower exercise price in the expiration series.

C)	the stock price is higher than the exercise price of the option.

The put option is in-the-money if the stock price is below the exercise price.

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发表于 2010-4-26 14:16 | 只看该作者

An out-of-the-money put and an in-the-money call are defined as:

Put Call

market price > strike price

strike price > market price

market price > strike price

strike price > market price

In-the-money put: strike > market; out-of-the-money put: market > strike.
In-the-money call: market > strike; out of the money call: strike > market.

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发表于 2010-4-26 14:17 | 只看该作者

Basil, Inc., common stock has a market value of $47.50. A put available on Basil stock has a strike price of $55.00 and is selling for an option premium of $10.00. The put is:

A)	out-of-the-money by $2.50.

B)	in-the-money by $7.50.

C)	in-the-money by $10.00.

The put allows a trader to sell Basil common stock for $7.50 more than the current market value ($55.00 ? $47.50). The trade is normally closed out with a cash settlement, but the trader could buy 100 shares for $47.50 per share and immediately sell them to the option writer for $55.00.

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发表于 2010-4-26 14:17 | 只看该作者

An investor would exercise a put option when the:

A)	price of the stock is below the strike price.

B)	price of the stock is equal to the strike price.

C)	price of the stock is above the strike price.

A put option gives its owner the right to sell the underlying good at a specified price (strike price) for a specified time period. When the stock's price is less than the strike price a put option has value and is said to be in-the-money.