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(1) An investor that is long the ABC Mar 25 call [email protected] when ABC is trading at $24.20
is said to be long an:A. In the money callB. At the money callC. Out of the money call
© 2016 Dr. N. Richie, UNCW
3
(1) An investor that is long the ABC Mar 25 call [email protected] when ABC is trading at $24.20
is said to be long an:A. In the money callB. At the money callC. Out of the money call
© 2016 Dr. N. Richie, UNCW
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(2) If the investor that is long the ABC Mar 25 call [email protected]
exercises, then the short position will:
A. Have the right to make deliveryB. Have the right to take deliveryC. Be obligated to make deliveryD. Be obligated to take delivery
© 2016 Dr. N. Richie, UNCW
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(2) If the investor that is long the ABC Mar 25 call [email protected]
exercises, then the short position will:
A. Have the right to make deliveryB. Have the right to take deliveryC. Be obligated to make deliveryD. Be obligated to take delivery
© 2016 Dr. N. Richie, UNCW
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(3) An investor that is long the ABC Mar 25 call [email protected] faces a maximum possible
loss of:
A. $1.10 per shareB. $25 per shareC. UnlimitedD. $25 less $1.10 per share
© 2016 Dr. N. Richie, UNCW
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(3) An investor that is long the ABC Mar 25 call [email protected] faces a maximum possible
loss of:
A. $1.10 per shareB. $25 per shareC. UnlimitedD. $25 less $1.10 per share
© 2016 Dr. N. Richie, UNCW
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(4) An investor who is short the XYZ Mar 35 put when XYZ is trading at 37 is said to be short an:
A. In the money putB. At the money putC. Out of the money put
© 2016 Dr. N. Richie, UNCW
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(4) An investor who is short the XYZ Mar 35 put when XYZ is trading at 37 is said to be short an:
A. In the money putB. At the money putC. Out of the money put
© 2016 Dr. N. Richie, UNCW
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(5) The writer of a put contract faces a maximum possible gain of:
A. The strike priceB. The price of the underlying at
expirationC. The premiumD. The strike price less the premium
© 2016 Dr. N. Richie, UNCW
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(5) The writer of a put contract faces a maximum possible gain of:
A. The strike priceB. The price of the underlying at
expirationC. The premiumD. The strike price less the premium
© 2016 Dr. N. Richie, UNCW
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(6) If LMN is trading at $133 per share, then the Feb 125 Call is
A. In the moneyB. At the moneyC. Out of the money
© 2016 Dr. N. Richie, UNCW
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(6) If LMN is trading at $133 per share, then the Feb 125 Call is
A. In the moneyB. At the moneyC. Out of the money
© 2016 Dr. N. Richie, UNCW
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(7) If LMN is trading at $123 per share, then the Feb 125 Call is
A. In the moneyB. At the moneyC. Out of the money
© 2016 Dr. N. Richie, UNCW
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(7) If LMN is trading at $123 per share, then the Feb 125 Call is
A. In the moneyB. At the moneyC. Out of the money
© 2016 Dr. N. Richie, UNCW
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(8) The short put position is:
A. Bullish and hopes the market will decline.
B. Bullish and hopes the market will rise.C. Bearish and hopes the market will
decline.D. Bearish and hopes the market will rise.
© 2016 Dr. N. Richie, UNCW
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(8) The short put position is:
A. Bullish and hopes the market will decline.
B. Bullish and hopes the market will rise.
C. Bearish and hopes the market will decline.
D. Bearish and hopes the market will rise.NOTE: the short put may also have a neutral outlook and not expect the price of the underlying to move up or down.
© 2016 Dr. N. Richie, UNCW
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(9) If the holder exercises a put, then the writer will have the:
A. Right to buy the underlyingB. Right to sell the underlyingC. Obligation to buy the underlyingD. Obligation to sell the underlying
© 2016 Dr. N. Richie, UNCW
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(9) If the holder exercises a put, then the writer will have the:
A. Right to buy the underlyingB. Right to sell the underlyingC. Obligation to buy the underlyingD. Obligation to sell the underlying
© 2016 Dr. N. Richie, UNCW
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(10)The XYZ Mar 35 Call is out of the money when:
A. XYZ is trading above $35 per shareB. XYZ is trading below $35 per share
© 2016 Dr. N. Richie, UNCW
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(10)The XYZ Mar 35 Call is out of the money when:
A. XYZ is trading above $35 per shareB. XYZ is trading below $35 per share
© 2016 Dr. N. Richie, UNCW
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(11)If in January an investor wants to go long the DEF Jul 50 call trading at $3.70 when DEF is trading at $47,
then in Jan he/she will have to pay:A. $3.70 per shareB. $47 per shareC. $50 per shareD. $50 less $3.70 per share
© 2016 Dr. N. Richie, UNCW
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(11)If in January an investor wants to go long the DEF Jul 50 call trading at $3.70 when DEF is trading at $47,
then in Jan he/she will have to pay:A. $3.70 per shareB. $47 per shareC. $50 per shareD. $50 less $3.70 per share
© 2016 Dr. N. Richie, UNCW
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(12)If ABC is trading at $122 per share, then the Feb 125 Put is
A. In the moneyB. At the moneyC. Out of the money
© 2016 Dr. N. Richie, UNCW
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(12)If ABC is trading at $122 per share, then the Feb 125 Put is
A. In the moneyB. At the moneyC. Out of the money
© 2016 Dr. N. Richie, UNCW
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(13)If ABC is trading at $133 per share, then the Feb 125 Put is
A. In the moneyB. At the moneyC. Out of the money
© 2016 Dr. N. Richie, UNCW
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(13)If ABC is trading at $133 per share, then the Feb 125 Put is
A. In the moneyB. At the moneyC. Out of the money
© 2016 Dr. N. Richie, UNCW
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(14)The XYZ Mar 35 Put is in the money when:
A. XYZ is trading above $35 per shareB. XYZ is trading below $35 per share
© 2016 Dr. N. Richie, UNCW
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(14)The XYZ Mar 35 Put is in the money when:
A. XYZ is trading above $35 per shareB. XYZ is trading below $35 per share
© 2016 Dr. N. Richie, UNCW
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(15)If the holder exercises a put, then the writer will have to:
A. Make delivery of the underlyingB. Take delivery of the underlying
© 2016 Dr. N. Richie, UNCW
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(15)If the holder exercises a put, then the writer will have to:
A. Make delivery of the underlyingB. Take delivery of the underlying
© 2016 Dr. N. Richie, UNCW
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(16)An investor who is long the UUU Mar 35 put when UUU is trading at $33 issaid to be long an:
A. In the money putB. At the money putC. Out of the money put
© 2016 Dr. N. Richie, UNCW
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(16)An investor who is long the UUU Mar 35 put when UUU is trading at $33 issaid to be long an:
A. In the money putB. At the money putC. Out of the money put
© 2016 Dr. N. Richie, UNCW
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(17)An investor that is short the YYY Mar 25 call [email protected] when YYY is trading at $26.50
is said to be short an:A. In the money callB. At the money callC. Out of the money call
© 2016 Dr. N. Richie, UNCW
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(17)An investor that is short the YYY Mar 25 call [email protected] when YYY is trading at $26.50
is said to be short an:A. In the money callB. At the money callC. Out of the money call
© 2016 Dr. N. Richie, UNCW
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(18)An investor who buys an GGG Feb 130 put at $6.35 experiences a positive payoff
if:
A. GGG trades above $130 per shareB. GGG trades below $130 per shareC. GGG remains at $130 per share
© 2016 Dr. N. Richie, UNCW
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(18)An investor who buys an GGG Feb 130 put at $6.35 experiences a positive payoff
if:
A. GGG trades above $130 per shareB. GGG trades below $130 per shareC. GGG remains at $130 per share
© 2016 Dr. N. Richie, UNCW
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Payoff and Profit of LONG Stock
ABC stock initially purchased for $35
ST Payoff Profit
25.00
30.00
35.00
40.00
© 2016 Dr. N. Richie, UNCW
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Solution - LONG StockABC stock initially purchased for $35
ST Payoff Profit
25.00 25.00 - 10.00
30.00 30.00 - 5.00
35.00 35.00 0.00
40.00 40.00 + 5.00
© 2016 Dr. N. Richie, UNCW
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Payoff and Profit of SHORT Stock
ABC stock sold short at $35
ST Payoff Profit
25.00
30.00
35.00
40.00
© 2016 Dr. N. Richie, UNCW
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Solution - SHORT StockABC stock sold short at $35
ST Payoff Profit
25.00 -25.00 +10.00
30.00 - 30.00 +5.00
35.00 - 35.00 0.00
40.00 - 40.00 - 5.00
© 2016 Dr. N. Richie, UNCW
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Payoff and Profit of LONG Bond$100 Face Value initially purchased for
$95ST Payoff Profit
25.00
30.00
35.00
40.00
© 2016 Dr. N. Richie, UNCW
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Solution - LONG Bond$100 Face Value initially purchased for
$95ST Payoff Profit
25.00 100.00 +5.00
30.00 100.00 +5.00
35.00 100.00 +5.00
40.00 100.00 +5.00
© 2016 Dr. N. Richie, UNCW
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Payoff and Profit of SHORT Bond
$100 Face Value initially issued for $95
ST Payoff Profit
25.00
30.00
35.00
40.00
© 2016 Dr. N. Richie, UNCW
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Solution - SHORT Bond$100 Face Value initially issued for $95
ST Payoff Profit
25.00 -100.00 -5.00
30.00 -100.00 -5.00
35.00 -100.00 -5.00
40.00 -100.00 -5.00
© 2016 Dr. N. Richie, UNCW
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Value of LONG Call at Expiration
XYZ Jun 17.50 Call at $2.50ST In or out? Payoff Profit
12.5015.0017.5020.0027.50
© 2016 Dr. N. Richie, UNCW
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Solution - LONG Call at Expiration
ST In or out? Payoff Profit12.50 Out 0 -2.5015.00 Out 0 -2.5017.50 At 0 -2.5020.00 In 2.50 027.50 In 10.00 +7.50
© 2016 Dr. N. Richie, UNCW
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Value of SHORT Call at Expiration
XYZ Jun 17.50 Call at $2.50ST In or out? Payoff Profit
12.5015.0017.5020.0027.50
© 2016 Dr. N. Richie, UNCW
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Solution - SHORT Call at Expiration
XYZ Jun 17.50 Call at $2.50ST In or out? Payoff Profit
12.50 Out 0 +2.5015.00 Out 0 +2.5017.50 At 0 +2.5020.00 In -2.50 027.50 In -10.00 -7.50
© 2016 Dr. N. Richie, UNCW
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Value of LONG Put at Expiration
AAA Feb 10 Put at $2.00
ST In or out? Payoff Profit
6.008.0010.0012.0014.00
© 2016 Dr. N. Richie, UNCW
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Solution - LONG Put at Expiration
AAA Feb 10 Put at $2.00
ST In or out? Payoff Profit
6.00 In 4.00 2.008.00 In 2.00 010.00 At 0 -2.0012.00 Out 0 -2.0014.00 Out 0 -2.00
© 2016 Dr. N. Richie, UNCW
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Value of SHORT Put at Expiration
AAA Feb 10 Put at $2.00
ST In or out? Payoff Profit
6.008.0010.0012.0014.00
© 2016 Dr. N. Richie, UNCW