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Online Quiz 10 Options Q&A
Online Quiz 10 Options Q&A
Question: Suppose you purchase one RIO Jan 100 call contract at $5 and write one RIO Jan
105 call contract at $2. The option contract size is 1000 shares per contract. If, at expiration,
the price of a share of RIO stock is $103, your profit would be
Correct Answer:
zero
Question: The price that the buyer of a stock put option receives for the underlying asset if
she exercises her option is the
Correct Answer:
exercise price
Question: The price that the writer of a stock put option receives for the underlying asset if
the option is exercised is the
Selected
Answer:
none of the above as the writer does not receive the underlying asset if
the option is exercised
Correct
Answer:
Response
Feedback:
Question: You write one RIO February 70 put for a premium of $5. Ignoring transactions
costs, what is the breakeven price of this position?
Correct Answer:
$65
Question: The price that a trader receives from writing a stock option is the
Correct Answer:
premium
Correct Answer:
zero.
Selected
Answer:
Correct Answer:
Response
Feedback:
B and C.
An American call option may be exercised (allowing the holder to buy the
underlying asset) on or before expiration; the option contract also may be sold
prior to expiration.
Question: The maximum loss for a writer of a naked stock call option is
Correct Answer:
unlimited.
Question: 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
Correct Answer:
increases to $506.
zero.
Correct Answer:
Response
Feedback:
The intrinsic value of an in-the-money put option contract is the strike price less
the stock price, since the holder can buy the stock at the market price and
exercise the option to sell the stock for the strike price.
A and C.
Correct Answer:
B and C.
Response
Feedback:
Options are merely contracts between buyer and seller and sold primarily
on an organized exchange.
Correct Answer:
$2000