04 Jun FIN 567 Midterm NEW
Question 1. Question : (TCO A) An order that closes an existing position is called a(n) ______.
Question 2. Question : (TCO A) Which of the following is not a characteristic of a short call position?
Question 3. Question : (TCO E) The owner of a call that expires in the money (ignore cash settlement options) ________.
Question 4. Question : (TCO C) For tax purposes, futures contracts are assumed to be ______.
Question 5. Question : (TCO C) The agency that administers the Commodity Exchange Act is ____.
Question 6. Question : (TCO D) A Jan 50 call option is deep in the money when the ______.
Question 7. Question : (TCO A) How many equity option exchanges exist in the United States?
Question 8. Question : (TCO C) What is the tax consequence when a short call that was written more than a year ago on stock expires worthless?
Question 9. Question : (TCO D) Assume that put and call options with a $50 strike price expire with the stock at $70. Which of the following statements is correct?
Question 10. Question : (TCO E) Assume the following:
Option Strike price Call price Put price
A 90 18 1
B 100 9 3
C 110 3 8
D 120 1 17
What would a short put condor include?
Question 11. Question : (TCO F) What happens to gamma as expiration is approached for options that are near the money?
Question 12. Question : (TCO G) The first rule of the cash-and-carry relationship for futures contracts is that the futures price must be _______.
Question 13. Question : (TCO G) The Dow Jones Industrial Average is ______.
Question 14. Question : (TCO G) A fund manager who wants to buy Japanese equities now, but won’t have the cash for three months can buy a stock index futures contract as a ______.
Question 15. Question : (TCO F) Strangle writers prefer ______.
Question 16. Question : (TCO F) What is the approximate value of delta for a deep-in-the-money call?
Question 17. Question : (TCO F) Vega is least for options that are ______.
Question 18. Question : (TCO A) On which exchanges do options on futures trade?
Question 19. Question : (TCO D) A trader sold a Sep 50 call for $5. At expiration, the stock closed at $53. What was the net result after the trader delivered the stock?
Question 20. Question : (TCO B) In 1979–1980, the Hunt brothers manipulated which market?
Question 21. Question : (TCO B) Which of the following is the most actively traded futures contract?
Question 22. Question : (TCO E) The maximum profit in a bull put spread at expiration occurs when the stock price is _______.
Question 23. Question : (TCO C) What is the limitation on the tax deductibility of net capital losses in one tax year?
Question 24. Question : (TCO D) The maximum profit in a bull call spread at expiration occurs when the stock price is _______.
Question 1. Question : (TCO C) An investor bought 100 shares of stock at $40. The stock now sells for $60 and the investor writes a 65 call for $2. What is the maximum possible gain and loss in this covered call position?
Question 2. Question : (TCO D) An investor bought stock at $50 and sold a covered call with a 55 strike price for $2. The stock now sells for $60.
Part 1: What is the intrinsic value in the option? Assume the call is priced at $7.
Part 2: What is the time value in the option?
Part 3: What would you expect to happen to the value of the call and the 55 put if a shock to the market causes volatility to increase dramatically?
Question 3. Question : (TCO E) Part 1: If you hold two XYZ Dec 60 calls and the stock splits 2 for 1, what will be your resulting position?
Part 2: What is the gain or loss for the following long butterfly spread if the stock is at $302 at expiration?
Buy 1 Jun 300 call at 9
Sell 2 Jun 305 calls at 5
Buy 1 Jun 310 call at 2
Part 3: Construct a bull put spread with the following options:
Apr 40 put at 3
Apr 45 put at 6
Show the P/L result over a range of 38–47.
Question 4. Question : (TCO G) What are the independent variables in the equity options pricing model?
What would you expect deltas to be for an at-the-money call and an at-the-money put?
Why do some portfolio managers attempt to remain delta neutral?
What kind of position do straddle writers plan to maintain?
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