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Question 1 of 10
1. Question
From the statements below regarding long put and short futures, which one seems to be inappropriate to you?
Correct
Long put and short futures
As hedges, both a long put and a short futures seek to protect an underlying long position from a decline in prices. A long put will gain value at any price below the strike price; the downside risk is limited to the premium paid. A short futures will gain value at any price below the market price at inception; downside loss is incurred at any price above the market, and also includes commissions and margin.
Incorrect
Long put and short futures
As hedges, both a long put and a short futures seek to protect an underlying long position from a decline in prices. A long put will gain value at any price below the strike price; the downside risk is limited to the premium paid. A short futures will gain value at any price below the market price at inception; downside loss is incurred at any price above the market, and also includes commissions and margin.
Question 2 of 10
2. Question
Which of the following statements is false regarding long put and short futures?
Correct
Long put and short futures
The table shows the profitability, ROI, and breakeven point for a long put and a short futures in various pricing scenarios. Note that there are continuing losses for futures as prices increase, while the maximum loss for a put is limited to the premium.
Incorrect
Long put and short futures
The table shows the profitability, ROI, and breakeven point for a long put and a short futures in various pricing scenarios. Note that there are continuing losses for futures as prices increase, while the maximum loss for a put is limited to the premium.
Question 3 of 10
3. Question
Regarding synthetic long put, which of the following statements is true?
Correct
Synthetic long put
A synthetic long put is a combination of a long call and a short futures, and provides the same result as an outright long put. The position is designed to profit from price decreases. However, the long call serves to offset losses on the futures if prices increase. The important caveat is that the strike price for all positions must be the same.
Incorrect
Synthetic long put
A synthetic long put is a combination of a long call and a short futures, and provides the same result as an outright long put. The position is designed to profit from price decreases. However, the long call serves to offset losses on the futures if prices increase. The important caveat is that the strike price for all positions must be the same.
Question 4 of 10
4. Question
From the statements below regarding synthetic long put, which one seems to be the most appropriate to you?
Correct
Synthetic long put
A synthetic long put is a combination of a long call and a short futures, and provides the same result as an outright long put. The position is designed to profit from price decreases. However, the long call serves to offset losses on the futures if prices increase. The important caveat is that the strike price for all positions must be the same.
Incorrect
Synthetic long put
A synthetic long put is a combination of a long call and a short futures, and provides the same result as an outright long put. The position is designed to profit from price decreases. However, the long call serves to offset losses on the futures if prices increase. The important caveat is that the strike price for all positions must be the same.
Question 5 of 10
5. Question
Which of the following statements is false regarding synthetic long put?
Correct
Synthetic long put
The table shows the profitability, ROI, and breakeven point for a synthetic long put in various pricing scenarios. Note that the combined profitability for both positions is the same as what would be calculated for a separate long put.
Incorrect
Synthetic long put
The table shows the profitability, ROI, and breakeven point for a synthetic long put in various pricing scenarios. Note that the combined profitability for both positions is the same as what would be calculated for a separate long put.
Question 6 of 10
6. Question
Which of the following statements is true regarding synthetic long call?
Correct
Synthetic long call
A synthetic long call is a combination of a long put and a long futures, and provides the same result as an outright long call. The position is intended to profit from price increases. However, the long put serves to offset futures losses in the event of price decreases. The maximum loss is limited to the premium paid. The important caveat is that the strike price for all positions must be the same.
Incorrect
Synthetic long call
A synthetic long call is a combination of a long put and a long futures, and provides the same result as an outright long call. The position is intended to profit from price increases. However, the long put serves to offset futures losses in the event of price decreases. The maximum loss is limited to the premium paid. The important caveat is that the strike price for all positions must be the same.
Question 7 of 10
7. Question
Which of the following statements is false regarding synthetic long call?
Correct
Synthetic long call
A synthetic long call is a combination of a long put and a long futures, and provides the same result as an outright long call. The position is intended to profit from price increases. However, the long put serves to offset futures losses in the event of price decreases. The maximum loss is limited to the premium paid. The important caveat is that the strike price for all positions must be the same.
Incorrect
Synthetic long call
A synthetic long call is a combination of a long put and a long futures, and provides the same result as an outright long call. The position is intended to profit from price increases. However, the long put serves to offset futures losses in the event of price decreases. The maximum loss is limited to the premium paid. The important caveat is that the strike price for all positions must be the same.
Question 8 of 10
8. Question
From the statements below regarding synthetic short put, which one seems to be the most appropriate to you?
Correct
Synthetic short put
A synthetic short put is a combination of a short covered call and a long futures, and will provide the same result as an outright short put. The position is intended to protect an underlying long (covered) position from price decreases, and to profit from premium income. The long futures position protects the premium income in the event of price increases. In the event that the call is exercised, the trader is covered via the long position.
Incorrect
Synthetic short put
A synthetic short put is a combination of a short covered call and a long futures, and will provide the same result as an outright short put. The position is intended to protect an underlying long (covered) position from price decreases, and to profit from premium income. The long futures position protects the premium income in the event of price increases. In the event that the call is exercised, the trader is covered via the long position.
Question 9 of 10
9. Question
Which of the following statements is true regarding synthetic short put?
Correct
Synthetic short put
A synthetic short put is a combination of a short covered call and a long futures, and will provide the same result as an outright short put. The position is intended to protect an underlying long (covered) position from price decreases, and to profit from premium income. The long futures position protects the premium income in the event of price increases. In the event that the call is exercised, the trader is covered via the long position.
Incorrect
Synthetic short put
A synthetic short put is a combination of a short covered call and a long futures, and will provide the same result as an outright short put. The position is intended to protect an underlying long (covered) position from price decreases, and to profit from premium income. The long futures position protects the premium income in the event of price increases. In the event that the call is exercised, the trader is covered via the long position.
Question 10 of 10
10. Question
Regarding synthetic option, which of the following statements is true?
Correct
Synthetic option
A synthetic option is created by combining a futures position and an outright option position in a single order. The combined effect of each of the two legs provides a result that is equivalent to a single outright option.
Incorrect
Synthetic option
A synthetic option is created by combining a futures position and an outright option position in a single order. The combined effect of each of the two legs provides a result that is equivalent to a single outright option.
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