Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
48. Which one of the following is the ticker symbol for the CBOE option contract on the S&P
100 Index?
49. The May 17, 2012, price quotation for a Boeing call option with a strike price of $50 due to
expire in November is $20.80, while the stock price of Boeing is $69.80. The premium on one
Boeing November 50 call contract is _________.
50. You purchase one IBM March 120 put contract for a put premium of $10. The maximum
profit that you could gain from this strategy is _________.
51. You buy one Hewlett Packard August 50 call contract and one Hewlett Packard August 50
put contract. The call premium is $1.25, and the put premium is $4.50. Your highest potential loss
from this position is _________.
52. You sell one Hewlett Packard August 50 call contract and sell one Hewlett Packard
August 50 put contract. The call premium is $1.25 and the put premium is $4.50. Your strategy will
pay off only if the stock price is __________ in August.
53. Suppose you purchase one Texas Instruments August 75 call contract quoted at $8.50 and
write one Texas Instruments August 80 call contract quoted at $6. If, at expiration, the price of a
share of Texas Instruments stock is $79, your profit would be _________.
54. __________ is the most risky transaction to undertake in the stock-index option markets if
the stock market is expected to fall substantially after the transaction is completed.
55. Which one of the following is a correct statement?
56. A put on Sanders stock with a strike price of $35 is priced at $2 per share, while a call
with a strike price of $35 is priced at $3.50. The maximum per-share loss to the writer of an
uncovered put is __________, and the maximum per-share gain to the writer of an uncovered call is
_________.
57. You are cautiously bullish on the common stock of the Wildwood Corporation over the
next several months. The current price of the stock is $50 per share. You want to establish a
bullish money spread to help limit the cost of your option position. You find the following option
quotes:
To establish a bull money spread with calls, you would _______________.
58. You are cautiously bullish on the common stock of the Wildwood Corporation over the
next several months. The current price of the stock is $50 per share. You want to establish a
bullish money spread to help limit the cost of your option position. You find the following option
quotes:
Ignoring commissions, the cost to establish the bull money spread with calls would be _______.
59. You are cautiously bullish on the common stock of the Wildwood Corporation over the
next several months. The current price of the stock is $50 per share. You want to establish a
bullish money spread to help limit the cost of your option position. You find the following option
quotes:
If in June the stock price is $53, your net profit on the bull money spread (buy the 45 call and sell
the 55 call) would be ________.
60. You are cautiously bullish on the common stock of the Wildwood Corporation over the
next several months. The current price of the stock is $50 per share. You want to establish a
bullish money spread to help limit the cost of your option position. You find the following option
quotes:
To establish a bull money spread with puts, you would _______________.
61. You are cautiously bullish on the common stock of the Wildwood Corporation over the
next several months. The current price of the stock is $50 per share. You want to establish a
bullish money spread to help limit the cost of your option position. You find the following option
quotes:
Suppose you establish a bullish money spread with the puts. In June the stock's price turns out to
be $52. Ignoring commissions, the net profit on your position is _______________.
62. The common stock of the Avalon Corporation has been trading in a narrow range around
$40 per share for months, and you believe it is going to stay in that range for the next 3 months.
The price of a 3-month put option with an exercise price of $40 is $3, and a call with the same
expiration date and exercise price sells for $4.
What would be a simple options strategy using a put and a call to exploit your conviction about
the stock price's future movement?
63. The common stock of the Avalon Corporation has been trading in a narrow range around
$40 per share for months, and you believe it is going to stay in that range for the next 3 months.
The price of a 3-month put option with an exercise price of $40 is $3, and a call with the same
expiration date and exercise price sells for $4.
Selling a straddle would generate total premium income of _____.
64. The common stock of the Avalon Corporation has been trading in a narrow range around
$40 per share for months, and you believe it is going to stay in that range for the next 3 months.
The price of a 3-month put option with an exercise price of $40 is $3, and a call with the same
expiration date and exercise price sells for $4.
Suppose you write a strap and the stock price winds up to be $42 at contract expiration. What was
your net profit on the strap?
65. The common stock of the Avalon Corporation has been trading in a narrow range around
$40 per share for months, and you believe it is going to stay in that range for the next 3 months.
The price of a 3-month put option with an exercise price of $40 is $3, and a call with the same
expiration date and exercise price sells for $4.
How can you create a position involving a put, a call, and riskless lending that would have the
same payoff structure as the stock at expiration?
66. A stock is trading at $50. You believe there is a 60% chance the price of the stock will
increase by 10% over the next 3 months. You believe there is a 30% chance the stock will drop by
5%, and you think there is only a 10% chance of a major drop in price of 20%. At-the-money 3-
month puts are available at a cost of $650 per contract. What is the expected dollar profit for a
writer of a naked put at the end of 3 months?
67. A covered call strategy benefits from what environment?
