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Q11. Which of the following represents a long position in an option?ffice ffice" />
A) Writing a call option.
B) Buying a put option.
C) Writing a put option.
Correct answer is B)
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.
Q12. 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) The predominant option type is American-style, rather than European-style.
C) They are only traded in the ffice:smarttags" />U.S.
Correct answer is C)
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.
Q13. Which of the following statements about uncovered call options is least accurate?
A) The most the writer can make is the premium plus the difference between the exercise price (X) and the stock price (S).
B) The loss potential to the writer is unlimited.
C) The profit potential to the holder is unlimited.
Correct answer is A)
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.
Q14. 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:
A) $2.
B) $5.
C) $0.
Correct answer is C)
The expiration day value of the put is $0 because it is trading out-of the money.
Q15. 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 American option can be exercised at anytime on or before its expiration date.
C) The European option can only be traded on overseas markets.
Correct answer is B)
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.
Q16. Which of the following statements about European and American options is least accurate?
A) American options are far more common than European options.
B) European options offer more flexible trading opportunities for speculators.
C) European options are easier to analyze and value than American options.
Correct answer is B)
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 2009-3-2 10:26
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