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Question 1 of 10
1. Question
The right relationship to calculate time value is-
Correct
Time value = premium – intrinsic value
Incorrect
Time value = premium – intrinsic value
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Question 2 of 10
2. Question
Which of the following is (are) true when buying a call?
I. Maximum gain: unlimited
II. Maximum loss: premium
III. Maximum gain: premium
IV. Maximum loss: unlimitedCorrect
When buying a call:
Maximum gain: unlimited
Maximum loss: premiumIncorrect
When buying a call:
Maximum gain: unlimited
Maximum loss: premium -
Question 3 of 10
3. Question
Which of the following is (are) true when buying a put?
I. Maximum gain: strike price – premium
II. Maximum gain: premium
III. Maximum loss: strike price – premium
IV. Maximum loss: premiumCorrect
When buying a put:
Maximum gain: strike price – premium
Maximum loss: premiumIncorrect
When buying a put:
Maximum gain: strike price – premium
Maximum loss: premium -
Question 4 of 10
4. Question
Which of the following statement(s) is (are) true about a bearish strategy?
I. A bearish options strategy is used when the investor expects the underlying stock to fall.
II. In case of a bearish strategy, the investor sells call options backed by a holding of the underlying stock.
III. Bearish strategies include put purchase, bear put spread, selling a “naked” call, and a bear call spread.
IV. In case of a bearish strategy, the investor sells put options on stock held, expecting the stock to remain (near) stagnant again so he or she can collect the premiums.Correct
A bearish options strategy is used when the investor expects the underlying stock to fall. Bearish strategies include put purchase, bear put spread, selling a “naked” call, and a bear call spread.
Incorrect
A bearish options strategy is used when the investor expects the underlying stock to fall. Bearish strategies include put purchase, bear put spread, selling a “naked” call, and a bear call spread.
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Question 5 of 10
5. Question
Which of the following statement(s) is (are) true about short straddle strategy?
When an investor uses a short straddle strategy, he or she sells-Correct
When an investor uses a short straddle strategy, he or she sells both a call and a put option at the same strike price and with the same expiration date.
Incorrect
When an investor uses a short straddle strategy, he or she sells both a call and a put option at the same strike price and with the same expiration date.
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Question 6 of 10
6. Question
Which of the following statement(s) is (are) true about a neutral strategy?
I. A neutral strategy is no less risky than a bullish or bearish strategy.
II. When an investor uses neutral options strategies, he or she positions himself or herself to make a profit if he or she expects the stock to stay stagnant or near- stagnant.
III. A neutral strategy is used when the investor expects the underlying stock to fall.
IV. The most simple of neutral options strategies is a covered call.Correct
A neutral strategy is no less risky than a bullish or bearish strategy.
When an investor uses neutral options strategies, he or she positions himself or herself to make a profit if he or she expects the stock to stay stagnant or near- stagnant.
The most simple of neutral options strategies is a covered call.Incorrect
A neutral strategy is no less risky than a bullish or bearish strategy.
When an investor uses neutral options strategies, he or she positions himself or herself to make a profit if he or she expects the stock to stay stagnant or near- stagnant.
The most simple of neutral options strategies is a covered call. -
Question 7 of 10
7. Question
Which of the following statement(s) is (are) true about a debit spread?
Correct
In case of a bear put spread (also called a debit spread because the investor has to pay more in premium initially), the investor buys and sells put options with the same expiration month.
Incorrect
In case of a bear put spread (also called a debit spread because the investor has to pay more in premium initially), the investor buys and sells put options with the same expiration month.
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Question 8 of 10
8. Question
For Bearish Strategies to be profitable, the premium of the call purchase needs to be-
Correct
Bearish Strategies
For this strategy to be profitable, the premium of the call purchase needs to be lower than the premium of the call sale.Incorrect
Bearish Strategies
For this strategy to be profitable, the premium of the call purchase needs to be lower than the premium of the call sale. -
Question 9 of 10
9. Question
When does selling a “naked” call happens?
Correct
Selling a “naked” call happens when an investor sells a call without holding the underlying security.
Incorrect
Selling a “naked” call happens when an investor sells a call without holding the underlying security.
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Question 10 of 10
10. Question
How can an investor make a bull call spread strategy profitable?
Correct
To make a bull call spread strategy profitable, an investor would buy a call at a lower strike and would sell a call at a higher strike price.
Incorrect
To make a bull call spread strategy profitable, an investor would buy a call at a lower strike and would sell a call at a higher strike price.