Series 65 Unit 4
Exercise of which of the following would not result in a change on the issuer's balance sheet?
A call option
Which of the following statements is true?
A futures contract has standardized terms.
Which of the following is not traded on any exchange?
Forward contracts
In general, the value of a derivative is primarily determined by which of the following? I. The price volatility of the underlying asset II. The exchange on which it is traded III. The length of time until the contract expires IV. Whether it is purchased from a broker or a dealer
I and III
Which of the following statements is most accurate when describing equity straddle options? I. The option buyer is looking for market volatility. II. The option buyer is looking for market stability. III. The option seller is looking for market volatility. IV. The option seller is looking for market stability.
I and IV
Options positions can create either rights or obligations. In which option position has the investor created the possible obligation to purchase stock?
Selling a put
The term used to describe investment vehicles whose value is based on an underlying asset is
derivative.
A commodities speculator purchases a 1,000-bushel wheat futures contract at $0.50 per bushel. At expiration, the settlement price is $0.45 per bushel. This individual
has a $50 loss.
Buying a put option on a security one currently owns allows an investor to
participate in additional gains if the security continues to increase in price.
One of the privileges frequently offered to holders of common stock is
preemptive rights.
You have a client who has sold short 100 shares of RIF, a stock listed on the NYSE. If the client wishes to use options to protect against unlimited loss, you would suggest the client
buy 1 RIF call.
Many investors with a long position in common stock employ the technique of writing call options on the underlying stock for the purpose of
generating income.
An investor who was sure that a stock's price was going to move substantially but wasn't sure in which direction would be able to benefit by
purchasing a straddle on that stock.
The term sweetener would most often apply to
warrants.