Options Quiz #1

A customer buys 1 OEX Jan 500 Call @ $5 when the index closes at 501. The maximum potential loss is: A. $500 B. $505 C. $5,000 D. unlimited

A

A customer buys 100 shares of ABC stock which is now trading at $63. A month later the market goes to $65. The customer thinks the market will remain near $65 in the following months, so he decides to sell 1 ABC Sept 65 Call @ $3. ABC then goes to $60 and the customer's call contract expires and the customer decides to liquidate his stock position at the current market price. The customer has a loss or gain of: A. $0 B. $300 gain C. $300 loss D. $500 loss

A

A customer sells 1 ABC Jan 100 Call @ $8 and buys 1 ABC Jan 120 Call @ $3 when the market price of ABC is $105. The breakeven point is: A. $105 B. $108 C. $115 D. $118

A

A customer sells 1 ABC Mar 40 Call @ $3 when the market price of ABC is at $41. ABC goes to $43 and just prior to expiration, the customer closes his option contract at intrinsic value. The customer has a: A. no gain or loss B. $200 gain C. $300 gain D. $300 loss

A

A customer sells 1 OEX Jan 550 Put @ $10 when the index is at 548.25. The maximum potential gain for the customer is: A. $1,000 B. $53,825 C. $54,000 D. unlimited

A

A customer who sells a "put spread" believes that the market will: A. rise B. fall C. remain neutral D. be volatile

A

On the same day a customer buys 1 ABC Jan 50 Call @ $2 and sells 1 ABC Jan 35 Call @ $8 when the market price of ABC is $41. The maximum potential gain is: A. $600 B. $800 C. $4,800 D. unlimited

A

On the same day a customer buys 100 shares of ABC stock at $30 and sells 1 ABC Jan 30 Call @ $3 and sells 1 ABC Jan 30 Put @ $2. The maximum potential gain is: A. $500 B. $2,500 C. $5,500 D. Unlimited

A

On the same day, a customer: Sells 1 ABC Jan 65 Call @ $6 Sells 1 ABC Jan 65 Put @ $6 when the market price of ABC is $65 If the market rises to $78 and the call is exercised (the put expires out the money), the gain or loss is: A. $100 loss B. $100 gain C. $1,200 gain D. $1,300 gain

A

Regular way trades of all of the following securities settle next business day EXCEPT: A. Listed stocks B. Listed stock options C. U.S. Government securities D. Agency securities

A

The maximum gain for the writer of a put is: A. the premium received B. unlimited C. strike price minus premium received D. strike price plus premium received

A

The maximum life of an index option contract is: A. 4 months B. 8 months C. 12 months D. 24 months

A

Which of the following would create a bull price spread? A. Long 1 ABC Jan 40 Call; Short 1 ABC Jan 50 Call B. Long 1 ABC Jan 40 Call; Short 1 ABC Apr 40 Call C. Long 1 ABC Jan 40 Put; Long 1 ABC Jan 40 Call D. Short 1 ABC Jan 40 Put; Long 1 ABC Apr 40 Put

A

A customer sells short 100 shares of PDQ at $58 and buys 1 PDQ Jul 60 Call @ $3. The customer's maximum potential loss is: A. $200 B. $300 C. $500 D. unlimited

C

A customer who buys 1 ABC Jan 30 Call and 1 ABC Jan 30 Put would want the market to: I rise II fall III remain flat A. I only B. II only C. Either I or II D. III only

C

A customer buys 1 ABC Jan 75 Call @ $9 and buys 1 ABC Jan 75 Put @ $6 when the market price of ABC = $77. The breakeven points are: A. $81 and $84 B. $90 and $60 C. $66 and $69 D. $90 and $96

B

A customer buys 1 ABC Jul 70 Put at $9 when the market price of ABC is $66. ABC stock falls to $62 per share and the customer exercises the put and buys the stock at the market for delivery. The customer: A. gains $100 B. loses $100 C. gains $700 D. gains $800

B

A customer buys 100 ABC at $76 per share and buys 1 ABC Jan 75 Put @ $3. The stock subsequently falls to $65 and the customer exercises the put selling his stock. The customer has a: A. $300 loss B. $400 loss C. $1,000 loss D. $1,100 loss

B

A customer buys 2 ABC Jan 60 Puts @ $4 when the market price of ABC is $59. If ABC stock rises to $62 and the customer closes the positions at $1, the gain or loss is: A. $300 loss B. $600 loss C. $700 gain D. $1,000 loss

B

A customer makes the following trades when the market price of ABC is $59: Sell 1 ABC Jan 50 Put @ $ 4 Buy 1 ABC Jan 65 Put @ $11 The maximum potential gain is: A. $700 B. $800 C. $1,100 D. $1,500

B

A customer sells 2 ABC Jan 60 Puts @ $4 when the market price of ABC is $59. The breakeven point is: A. 52 B. 56 C. 64 D. 68

B

A customer sells short 100 shares of PDQ stock at $59 and sells 1 PDQ Oct 60 Put @ $6. The market rises to $68 and the put expires. The customer buys the stock in the market covering her short stock position. The gain or loss is: A. $100 gain B. $300 loss C. $600 gain D. $900 loss

B

A short straddle is profitable in a: I rising market II falling market III stable market A. I only B. III only C. II and III D. I, II, III

B

An option contract that is exercisable at any time until expiration date is a(n): A. spot contract B. American contract C. European contract D. cash contract

B

In December, a customer sells 1 ABC Jan 100 Call @ $9 when the market price of ABC is 102. The customer's maximum potential gain is: A. $100 B. $900 C. $1,020 D. unlimited

B

In November, a customer buys 1 ABC Jan 70 Call @ $4 when the market price of ABC is 71. If the customer closes out the position prior to expiration by selling the call at $3, the gain or loss is? A. $100 gain B. $100 loss C. $300 gain D. $400 gain expiration by selling the call at $3, the gain or loss is? A. $100 gain B. $100 loss C. $300 gain D. $400 gain

B

On the same day, in a margin account, a customer buys 1 ABC Jan 60 Call @ $11 and sells 1 ABC Jan 80 Call @ $6. The maximum potential gain is: A. $500 B. $1,500 C. $2,000 D. unlimited

B

The market sentiment of a customer who purchases a "put spread" is: A. bullish B. bearish C. neutral D. volatile

B

To create a debit time spread, which statement is true? A. The near expiration is purchased and the far expiration is sold B. The near expiration is sold and the far expiration is purchased C. The near expiration is purchased and the far expiration is purchased D. The near expiration is sold and the far expiration is sold

B

Which of the following is a settlement type for foreign currency option trading? A. Spot B. Regular Way C. Forward D. Future

B

A customer sells 10 ABC Jan 50 Calls @ 4.75 when the market price of ABC is $51 per share. The breakeven point is: A. $45.25 B. $46.25 C. $54.75 D. $55.75

C

A customer sells 2 ABC Jan 40 Puts @ $9 when the market price of ABC is $36. If ABC stock rises to $41 and the customer closes the positions at $4, the gain or loss is: A. $500 gain B. $500 loss C. $1,000 gain D. $1,000 loss

C

A customer sells short 100 shares of ABC stock at $96 per share. The stock falls to $83, at which point the customer writes 1 ABC Sept 80 Put at $1. The stock falls to $74 and the put is exercised. The customer has a gain per share of: A. 14 points B. 16 points C. 17 points D. 23 points

C

A customer sells short 100 shares of PDQ at $49 and sells 1 PDQ Sep 50 Put @ $6. The breakeven point is: A. $43 B. $44 C. $55 D. $56

C

Equity options contracts expire on the: A. Saturday before the third Friday of the month at 10:59 PM Central Time B. Friday before the third Saturday of the month at 10:59 PM Central Time C. Saturday following the third Friday of the month at 10:59 PM Central Time D. Friday following the third Saturday of the month at 10:59 PM Central Time

C

If the market price is above the strike price on a put contract, the difference is termed the: A. in the money amount B. at the money amount C. out the money amount D. time value amount

C

On the same day, a customer buys 100 shares of ABC at $25 and sells short 100 shares of XYZ at $35. The customer then buys 1 ABC Jan 25 Put @ $4 and 1 XYZ Jan 35 Call @ $6. XYZ rises to $42 and the customer exercises the call. ABC falls to $19 and the customer exercises the put. The net gain or loss on all transactions is: A. $200 loss B. $1,000 gain C. $1,000 loss D. breakeven

C

What is the maximum maturity of an equity LEAP? A. 12 months B. 24 months C. 30 months D. 36 months

C

When the Euro is trading at $1.39, a customer takes the following positions: Sell 1 PHLX Jan Euro 140 Put Buy 1 PHLX Jan Euro 135 Put The position is profitable if: I the spread between the premiums widens II the spread between the premiums narrows III both contracts expire IV both contracts are exercised A. I and III B. I and IV C. II and III D. II and IV

C

A customer buys 100 shares of ABC stock at $39 and sells 1 ABC Jan 45 Call @ $2 on the same day in a cash account. The customer's maximum potential gain until the option expires is: A. $200 B. $300 C. $700 D. $800

D

A customer buys 100 shares of ABC stock at $58 and buys 1 ABC Jul 55 Put @ $2.50 on the same day. The maximum potential gain is: A. $5,250 B. $5,550 C. $6,050 D. unlimited

D

A customer sells 1 ABC Jul 65 Call @ $7 and sells 1 ABC Jul 65 Put @ $5 when the market price of ABC is $66. The breakeven points are: A. $60 and $72 B. $58 and $70 C. $63 and $67 D. $53 and $77

D

A customer sells short 100 shares of ABC at $35 and buys 1 ABC Jul 35 Call @ $3. The stock falls to $30 and the customer closes the option contract at $1 and buys the stock at the current market price. The customer has a: A. $200 loss B. $300 loss C. $200 gain D. $300 gain

D

A customer writes 1 XYZ Jan 40 Put. To cover the position, the customer would: A. Buy 1 XYZ Dec 30 Put B. Buy 1 XYZ Feb 30 Put C. Buy 1 XYZ Dec 50 Put D. Buy 1 XYZ Feb 50 Put

D

Foreign currency options expire on the Saturday: A. following the third Monday of the expiration month at 11:59 PM ET B. prior to the third Wednesday of the expiration month at 11:59 PM ET C. following the third Wednesday of the expiration month at 11:59 PM ET D. following the third Friday of the expiration month at 11:59 PM ET

D

On the same day a customer sells 1 ABC Feb 70 Call @ $4 and buys 1 ABC Feb 80 Call @ $1 when the market price of ABC is $70.50. The maximum potential loss is: A. $300 B. $400 C. $500 D. $700

D

On the same day, a customer buys 1 ABC Jan 50 Call @ $5 and sells 1 ABC Jan 60 Call @ $2. Above which of the following prices will every dollar gained on the long call be exactly offset by a dollar lost on the short call? A. $50 B. $53 C. $58 D. $60

D

Which of the following options strategies provides a gain equal to the premium in a bull market? A. Long Call B. Short Call C. Long Put D. Short Put

D

Which of the following options strategies would be considered a covered put? A. Short 1 ABC Jan 50 Put; Long 1 ABC Jan 50 Call B. Short 1 ABC Jan 50 Put; Long 2 ABC Jan 50 Calls C. Short 1 ABC Jan 50 Put; Long 100 ABC stock D. Short 1 ABC Jan 50 Put; Short 100 ABC stock

D