Q :A put option gives the
the right but not the obligation to
asset at a specified price.
1. seller, buy
2. seller, sell
3. owner, buy
4. owner, sell
A :The correct answer is number 4.
3.12 Options payoffs
Q :A stock currently sells at 120. The put option to sell the stock sells at Rs.134 costs Rs.18.
Th e time
A :The correct answer is number 2.
Q :An in-the-money option contract would generate
upon exercise for the buyers.
1. positive cash flow
2. pre-determined amount of cash flow
3. no cash flow
4. negative cash flow
A :The correct answer is number 1.
Q :By buying index futures one can make
1. unlimited profits or loss since
market may go up or down
2. limited profit but unlimited losses
3. limited profits or losses
4. unlimited profit but limited loss
value of the option is