CH 15 INV
The value of a listed call option is lower when
-The exercise price is higher -The contract approaches maturity -The stock decreases in value
Each listed stock option contract gives the holder the right to buy or sell ____ shares of stock
100
At contract maturity the value of a call option is ____, where X equals the options's strike price and St is the stock price at contract expiration
Max (0, St-X)
At contract maturity the value of a put option is _____, where X equals the option's strike price and St is the stock price at contract expiration
Max (0, X-St)
The writer of a put option___
agrees to buy shares at a set price if the option holder desires
An American call option gives the buyer the right to
buy the underlying asset at the exercise price on or before the expiration date
A European call option gives the buyer the right to
buy the underlying asset at the exercise price only at the expiration date
European option
can only be exercised on the expiration date
NOT an advantage of exchange-traded option over an OTC option
contracts that are tailored to meet the needs of market participants
A writer of a call option will want the value of the underlying asset to _____, and a buyer of a put option will want the value of the underlying asset to ____
decrease, decrease
The initial maturities of most exchange-traded options are generally
less than 1 year
an American style option will be ___ valuable than a ___ style option
more, European
a covered call strategy benefits from what environment
price stability
You invest in the stock of Valleyview Corp. and purchase a put option on Valleyview Corp. This strategy is called a
protective put
A futures call option provides its holder with the right to ___
purchase a futures contract at a specified price for a specified period of time
An American put option gives its holder the right to____
sell the underlying asset at the exercise price on or before the expiration date
A time spread may be executed by
selling an option with one expiration date and buying a similar option with a different expiration date
The value of a listed put option is lower when
the contract approaches maturity
The Option Clearing Corporation is owned by
the exchanges on which stock options are traded
call premium
the maximum loss of a buyer of a stock option can suffer
writing an uncovered put option
the most risky transaction to undertake in the stock-index option markets if the stock market is expected to fall substantially after the transaction is completed
The potential loss for a writer of a naked call option on a stock is ___
unlimited