Unit 2 Session 9 Forwards and Futures

When can you exercise European style options?

On the last trading day before expiration

What is considered the most conservative option position and what is the riskiest?

covered call; naked call

When can you exercise American style options?

Anytime up to the expiration date

What is the best way to hedge the short sale of a stock?

Buy a call

What is the SRO that is in charge of regulating forward and futures markets?

Commodity Futures Trading Commission

Regarding futures: if, at expiration, the settlement price is higher than delivery price, a _________ position results in a profit while a __________ position loses.

Long; short

Do forward contracts have a secondary market?

No (it is a direct commitment between one buyer and one seller)

What positions compose a straddle?

long call and put on the same stock with the same exercise and expiration

Those who buy a straddle will profit from ______________ while those who sell a straddle will profit if the market is __________________.

volatility; stable