标题: Reading 70: Option Markets and Contracts LOSa习题精选 [打印本页]
作者: honeycfa 时间: 2010-4-26 14:12 标题: [2010] Session 17 - Reading 70: Option Markets and Contracts LOSa习题精选
LOS a: Define European option, American option, and the concept of moneyness of an option.
Which of the following statements about call options at expiration is most accurate?
|
A) |
All of the answers are correct. | |
|
B) |
The profit potential to the buyer of the option is unlimited. | |
|
C) |
The call buyer's maximum loss is the call option's premium. | |
A call option gives its owner the right to purchase an underlying good at a specified price for a specified period of time. When the stock's price (S) is above the strike price (X), a call option has value and is said to be in the money.
The table below summarizes the maximum loss and gain for the call writer/owner:
|
Writer |
Owner |
| Maximum Loss |
unlimited |
premium |
| Maximum Gain |
premium |
unlimited |
Note: Trading call options is a zero-sum game. The long profits = the short losses.
作者: honeycfa 时间: 2010-4-26 14:12
Which of the following statements about options is most accurate?
|
A) |
For call options, the lower the strike price relative to the stock's underlying price, the more the call option is worth. | |
|
B) |
Most options throughout the world are European options. | |
|
C) |
A put writer who deposits shares of the underlying stock has written a covered put. | |
The other statements are false. Most options throughout the world are American options. A call writer who deposits shares of the underlying stock has written a covered call.
作者: honeycfa 时间: 2010-4-26 14:12
Which of the following statements about put and call options at expiration is least accurate?
|
A) |
|
The maximum loss to a writer is their cost on the stock less the premium |
The maximum gain to the buyer is unlimited. | | |
|
B) |
|
The maximum gain to the buyer is unlimited. |
The maximum loss to the writer is the premium. | | |
|
C) |
|
The maximum gain to the buyer is limited to the stock price less the premium price. |
The maximum gain to the buyer is unlimited. | | |
The maximum gain to the buyer of a put is limited to the value of the stock less the premium.
The maximum loss to the writer of a call is unlimited.
作者: honeycfa 时间: 2010-4-26 14:12
Regarding buyers and sellers of put and call options, which of the following statements concerning the resulting option position is most accurate? The buyer of a:
|
A) |
call option is taking a long position and the buyer of a put option is taking a short position. | |
|
B) |
put option is taking a short position and the seller of a call option is taking a short position. | |
|
C) |
call option is taking a long position while the seller of a put is taking a short position. | |
The buyers of both puts and calls are taking long positions in the options contracts (but the buyer of a put is establishing a potentially short exposure to the underlying), while writers (sellers) of each are taking short positions in the options contracts.
作者: honeycfa 时间: 2010-4-26 14:13
Consider a put option on Deter, Inc., with an exercise price of $45. The current stock price of Deter is $52. What is the intrinsic value of the put option, and is the put option at-the-money or out-of-the-money?
|
Intrinsic Value |
|
Moneyness |
The option has an intrinsic value of $0, because the stock price is above the exercise price. Put value is MAX (0, X-S). Equivalently, the option is out-of-the-money.
作者: honeycfa 时间: 2010-4-26 14:13
Bidco Corporation common stock has a market value of $30.00. Which statement about put and call options available on Bidco common is most accurate?
|
A) |
A call with a strike price of $25.00 is at-the-money. | |
|
B) |
A put with a strike price of $35.00 is in-the-money. | |
|
C) |
A put with a strike price of $20.00 has intrinsic value. | |
A put is in-the-money when its exercise price is higher than the market value of the underlying asset. A put with a $35.00 strike price allows the trader to sell 100 shares of stock for $35.00 per share, which is $5.00 higher than the prevailing market value. This gives the put a value, hence, it is in-the-money. For a call to be in-the-money, its strike price would have to be lower than the market value of the underlying common stock, allowing the trader to purchase 100 shares at a price below the prevailing market value. At-the-money is when the strike price and asset market value are equal. A put with a strike price of $20.00 does not have intrinsic value because it is below the $30 price of the stock. It does have time value meaning it is worth something because there is the possibility the put will come into the money before it expires.
作者: honeycfa 时间: 2010-4-26 14:13
James Anthony has a short position in a put option with a strike price of $94. If the stock price is below $94 at expiration, what will happen to Anthony’s short position in the option?
|
A) |
He will have the option exercised against him at $94 by the person who is long the put option. | |
|
B) |
The person who is long the put option will not exercise the put option. | |
|
C) |
He will let the option expire. | |
Anthony has sold the right to sell the stock at $94. That is, he received a payment upfront for the payer to have the right but not the obligation to sell the stock at $94. Because the option is in-the-money at expiration, MAX (0, X-S), the holder will exercise his right to sell at $94.
作者: honeycfa 时间: 2010-4-26 14:14
A European option can be exercised by:
|
A) |
its owner, anytime during the term of the contract. | |
|
B) |
its owner, only at the expiration of the contract. | |
|
C) |
either party, at contract expiration. | |
A European option can be exercised by its owner only at contract expiration.
作者: honeycfa 时间: 2010-4-26 14:14
A call option that is in the money:
|
A) |
has an exercise price greater than the market price of the asset. | |
|
B) |
has an exercise price less than the market price of the asset. | |
|
C) |
has a value greater than its purchase price. | |
A call option is in the money when the exercise price is less than the market price of the asset.
作者: honeycfa 时间: 2010-4-26 14:14
Which of the following represents a long position in an option?
|
|
|
B) |
Writing a call option. | |
|
|
A long position is always the buying position. Remember that the buyer of an option is said to have gone long the position, while the writer (seller) of the option is said to have gone short the position.
作者: honeycfa 时间: 2010-4-26 14:14
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.
作者: honeycfa 时间: 2010-4-26 14:15
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.
作者: honeycfa 时间: 2010-4-26 14:15
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:
The expiration day value of the put is $0 because it is trading out-of the money.
作者: honeycfa 时间: 2010-4-26 14:15
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.
作者: honeycfa 时间: 2010-4-26 14:16
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.
作者: honeycfa 时间: 2010-4-26 14:16
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.
作者: honeycfa 时间: 2010-4-26 14:16
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.
作者: honeycfa 时间: 2010-4-26 14:16
An out-of-the-money put and an in-the-money call are defined as:
Put Call
|
A) |
| market price > strike price |
market price > strike price | | |
|
B) |
| strike price > market price |
market price > strike price | | |
|
C) |
| 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.
作者: honeycfa 时间: 2010-4-26 14:17
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.
作者: honeycfa 时间: 2010-4-26 14:17
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.
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