Unit 3 Quiz 1

A 65-year-old investor is looking to earn additional income in her securities portfolio without much risk. Which of the following would likely be the least acceptable trading strategy for this investor?

Naked call writing

A call option reaches its expiration date and goes unexercised. This means

the buyer gains the premium paid. , the writer gains the premium received.

All of the following terms and phrases apply to the buy side of the options contract EXCEPT (a right, pays the premium, exercises contract, wants contract to expire)

wants the contract to expire.

At expiration, for those who trade put options, which of the following is true?

Put buyers want the contract to be in the money.

Regarding options, it should be recognized that the maximum movement for any underlying stocks price could be

as low as zero or as high as infinity.

Options contracts

give one party the right to buy or sell the underlying security

The holder of an in-the-money option contract gives a do not exercise instruction (notice) to your broker-dealer. This notice

is used to avoid automatic exercise at expiration.

A client has established a long put position. The contract will have intrinsic value when the price of the underlying stock is

less than the exercise price

When XYZ is trading at 40, an XYZ 30 put sold at 3 would be

out of the money

An investor is long a January 30 Call at 2. Breakeven is

32.

Your customer is long 1 October 55 put at 4. Your customer's breakeven point is

51.

AN investor is short a January 30 call at 5. Max Loss for the investor is __________________________.

unlimited

Which of the following strategies is a covered call?

Short call, long call

All of the following terms and phrases are associated with the sell side of the contract except

pays the premium

if a customer sold puts to open, which of the following transactions would be allowed if the options agreement was not returned signed within 15 days?

Sell puts to open