Chapter 20 – Options Markets: Introduction
20–21
59. Call options on IBM listed stock options are
Difficulty: Moderate
60. Buyers of call options __________ required to post margin deposits and sellers of put
options __________ required to post margin deposits.
Difficulty: Moderate
20–22
61. Buyers of put options anticipate the value of the underlying asset will __________ and
sellers of call options anticipate the value of the underlying asset will ________.
Difficulty: Moderate
62. The Option Clearing Corporation is owned by
Difficulty: Moderate
63. A covered call position is
Difficulty: Moderate
20–23
64. A covered call position is equivalent to a
Difficulty: Moderate
65. According to the put-call parity theorem, the value of a European put option on a non-
dividend paying stock is equal to:
Difficulty: Difficult
66. A protective put strategy is
Difficulty: Moderate
20–24
67. Suppose the price of a share of Google stock is $500. An April call option on Google
stock has a premium of $5 and an exercise price of $500. Ignoring commissions, the holder of
the call option will earn a profit if the price of the share
Difficulty: Moderate
68. Suppose the price of a share of IBM stock is $100. An April call option on IBM stock has
a premium of $5 and an exercise price of $100. Ignoring commissions, the holder of the call
option will earn a profit if the price of the share
Difficulty: Moderate
20–25
69. You purchased one AT&T March 50 call and sold one AT&T March 55 call. Your
strategy is known as
Difficulty: Moderate
70. You purchased one AT&T March 50 put and sold one AT&T April 50 put. Your strategy
is known as
Difficulty: Moderate
20–26
71. Before expiration, the time value of a call option is equal to
Difficulty: Moderate
72. Which of the following factors affect the price of a stock option
Difficulty: Moderate
73. All of the following factors affect the price of a stock option except
Difficulty: Moderate
20–27
74. The value of a stock put option is positively related to the following factors except
Difficulty: Moderate
75. The value of a stock put option is positively related to
Difficulty: Moderate
76. You purchase one September 50 put contract for a put premium of $2. What is the
maximum profit that you could gain from this strategy?
Difficulty: Moderate
20–28
77. You purchase one June 70 put contract for a put premium of $4. What is the maximum
profit that you could gain from this strategy?
Difficulty: Moderate
78. You purchase one IBM March 100 put contract for a put premium of $6. What is the
maximum profit that you could gain from this strategy?
Difficulty: Moderate
20–29
79. The following price quotations were taken from the Wall Street Journal.
The premium on one February 90 call contract is
Difficulty: Moderate
80. The following price quotations on IBM were taken from the Wall Street Journal.
The premium on one IBM February 90 call contract is
Difficulty: Moderate
20–30
81. The following price quotations on IBM were taken from the Wall Street Journal.
The premium on one IBM February 85 call contract is
82. The maximum potential profit of your strategy is
Difficulty: Difficult
20–31
83. If, at expiration, the price of a share of IBM stock is $103, your profit would be
Difficulty: Difficult
84. The maximum loss you could suffer from your strategy is
Difficulty: Difficult
85. What is the lowest stock price at which you can break even?
Difficulty: Difficult
You buy one Xerox June 60 call contract and one June 60 put contract. The call premium is
$5 and the put premium is $3.
20–32
86. Your strategy is called
Difficulty: Moderate
87. Your maximum loss from this position could be
Difficulty: Moderate
88. At expiration, you break even if the stock price is equal to
Difficulty: Difficult