Stock Options

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Question 1
Free
Multiple Choice

The value of an option is dependent upon the value of the underlying security.This relationship defines an option as which one of the following?

Choose correct answer/s
A

equity security

B

fixed income security

C

derivative security

D

transfer security

E

dependent security

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Question 2
Free
Multiple Choice

A call option grants its owner which one of the following?

Choose correct answer/s
A

right to buy

B

obligation to buy

C

right to sell

D

obligation to sell

E

choice to either buy or sell

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Question 3
Free
Multiple Choice

By definition,a put option grants its owner which one of the following?

Choose correct answer/s
A

right to buy

B

obligation to buy

C

right to sell

D

obligation to sell

E

choice to either buy or sell

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Question 4
Free
Multiple Choice

Which one of the following is defined as the price at which an option will be exercised?

Choose correct answer/s
A

straddle

B

spread

C

strike

D

market

E

underlying

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Question 5
Free
Multiple Choice

Which one of the following distinguishes an option as an American style option?

Choose correct answer/s
A

option that grants its holder the right to purchase at the strike price

B

option that grants its holder the right to sell at the strike price

C

option that obligates its holder to sell at the strike price

D

option that can be exercised at any time prior to expiration

E

option that can only be exercised at expiration

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Question 6
Multiple Choice

Which one of the following is defined as an option that can only be exercised at expiration?

Choose correct answer/s
A
European style option
B
in-the-money option
C
out-of-the-money option
D
American style option
E
derivative option
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Question 7
Multiple Choice

A list of available option contracts and their prices for a particular security listed in order of strike price and maturity date is referred to as which one of the following?

Choose correct answer/s
A
value chain
B
intrinsic list
C
option chain
D
strike list
E
exercise price display
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Question 8
Multiple Choice

Which one of the following guarantees that the terms of an exchange-listed option contract are fulfilled when an option is exercised?

Choose correct answer/s
A
Securities and Exchange Commission
B
Federal Reserve
C
New York Options Exchange
D
Options Clearing Corporation
E
Securities Investors Protection Corporation
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Question 9
Multiple Choice

By definition,stock index options would include an option on which one of the following underlying assets?

Choose correct answer/s
A
gold
B
corn
C
U.S. dollar
D
S&P 500
E
U.S. Treasury bill
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Question 10
Multiple Choice

A cash-settled option is defined as an option which does which one of the following?

Choose correct answer/s
A
requires a cash deposit upon purchase
B
has a foreign currency as its underlying asset
C
has the U.S. dollar at its underlying asset
D
entails a cash payment to the holder upon exercise
E
offers the option to either deliver the underlying asset or a cash payment
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Question 11
Multiple Choice

Which one of the following terms is defined as an option that would have a positive payoff if exercised now?

Choose correct answer/s
A
in-the-money option
B
out-of-the-money option
C
straddle
D
crossed option
E
cash-settled
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Question 12
Multiple Choice

An option that would NOT yield a positive payoff if exercised today is referred to by which one of the following terms?

Choose correct answer/s
A
hollow option
B
zero option
C
in-the-cellar option
D
out-of-the-money option
E
strike-out
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Question 13
Multiple Choice

Which one of the following terms is defined as the payoff that would be received if an option were expiring immediately?

Choose correct answer/s
A
parity price
B
market price
C
time value
D
underlying value
E
intrinsic value
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Question 14
Multiple Choice

Which one of the following is equal to the option premium minus the intrinsic value?

Choose correct answer/s
A
parity value
B
payoff value
C
time value
D
strike value
E
profit
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Question 15
Multiple Choice

Which one of the following refers to selling an option contract?

Choose correct answer/s
A
calling
B
writing
C
exercising
D
striking
E
spotting
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Question 16
Multiple Choice

Which of the following has the obligation to sell a stock at the strike price when an option is exercised?

Choose correct answer/s
A
call holder
B
call writer
C
put holder
D
put writer
E
call holder and put writer
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Question 17
Multiple Choice

Which of the following has the obligation to purchase stock at the strike price when an option is exercised?

Choose correct answer/s
A
call holder
B
call writer
C
put holder
D
put writer
E
call writer and put holder
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Question 18
Multiple Choice

You currently own 300 shares of Microsoft stock.If you purchase options on this stock to protect against future declines in the price of the stock you are implementing which one of the following?

Choose correct answer/s
A
covered call
B
naked call
C
protective put
D
bear spread
E
straddle
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Question 19
Multiple Choice

Selling a call option on stock which you own is referred to as which one of the following strategies?

Choose correct answer/s
A
covered call
B
naked call
C
protective put
D
underlying put
E
straddle
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Question 20
Multiple Choice

Kris implemented an option trading strategy consisting of two call options.This strategy is known as which one of the following?

Choose correct answer/s
A
spread
B
straddle
C
split
D
combination
E
counteraction
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