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Reading 70: Option Markets and Contracts LOSh习题精选

LOS h: Determine the minimum and maximum values of European options and American options.

Which of the following statements regarding an option prior to expiration is most accurate? The maximum value of a(n):

A)
American call is equal to the maximum value of a European call.
B)
European call is greater than the maximum value of an American call.
C)
American put is equal to the maximum value of a European put.



The theoretical maximum value of both a European and American call is the price of the underlying stock. The theoretical maximum value of an American put is the exercise price, while the theoretical maximum value of a European put is the present value of the exercise price. Thus the maximum value is less for a European put than for an American put.

 

Which of the following statements regarding an option prior to expiration is TRUE? The maximum value of:

A)
a European put is equal to the maximum value of an American put.
B)
an American call is less than the maximum value of a European call.
C)
a European put is less than the maximum value of an American put.



The maximum value of a European put is X/(1+R)T and the maximum value of an American put is X.

TOP

The following value diagram illustrates a:

A)

long put option.

B)

long call option.

C)

short put option.




This value diagram represents a long call position. The holder (buyer) of the option pays a premium to receive a payment if the stock price is higher than the exercise price. As the stock price rises above the exercise price, the option pays more to the buyer. The maximum that the call buyer can lose is the amount of the premium, while the profit potential for the call buyer is unlimited.

TOP

The following value diagram illustrates a:

A)

short put option.

B)

short call option.

C)

long put option.




This value diagram represents a short call position. The seller (writer) of the option receives a premium. However, as the stock price rises further above the exercise price, the seller of the option loses more. Note that the greatest profit the call seller (writer) can receive is the amount of the premium, while the potential loss is unlimited.

TOP

Which of the following statements about puts is FALSE? The most the:

A)
buyer can gain is unlimited.
B)
writer can gain is the put premium.
C)
writer can lose is the strike price less the premium.



The most the buyer can gain is the strike price of the stock less the premium.

TOP

The minimum value for a European call option is:

A)
max [0, (S – X) / (1 + R)T].
B)
min [0, S ? X / (1 + R)T].
C)
max [0, S ? X / (1 + R)T].



The minimum value of a European call option is max [0, S ? X / (1 + R)T].

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