Unit 2 Session 9 Forwards and Futures

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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


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