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Terms in this set (17)Options investors who are I and IV 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. (Put buyers are bearish and want the underlying stock to fall in value. Puts give the owner the right to sell at the contract's exercise (strike) price. Therefore, the put contract will pick up intrinsic value if the price of the underlying stock falls below the contract's strike price. The long put position will become profitable if the stock falls below the strike by more than the amount of the premium paid.) A March 30 call purchased at 3 has expired without being exercised. The owner of the call loses the $300 premium paid. The maximum gain on a long call is unlimited (a long call goes up in value as the price of the underlying security goes up above the strike price.) An investor is long a January 30 call at 2. Maximum gain for this position is unlimited. Your customer is long 1 October 55 put at 4. The customer's maximum loss potential is 4 points ($400) (for long option contracts (puts or calls), the maximum loss is always the premium initially paid.) Which of the following has an obligation and is bearish on the stock? Short call (long calls have a right and are bullish. Short calls have an obligation and are bearish. long puts have a right and are bearish. short puts have an obligation and are bullish.) Options contracts give on party the right to buy or sell the underlying security (Options contracts involve two parties: buyer and seller. one party (buyer) has the right to either buy or sell the underlying security, while the other party (seller) would have the obligation to fulfill the contra side of the buy or sell transaction.) Which of the following positions would give an investor an unlimited loss potential? II and III (A short stock position gives an investor unlimited risk potential if the stock should rise because the investor must eventually buy back the stock at the higher price.) Which position has the greatest potential risk if the price of the underlying stock goes up? Short call (the greatest potential risk has to do with the maximum loss potential. If the market is rising, the greatest potential risk posed by an option position is a short naked call because the potential maximum loss is unlimited.) All of the following terms and phrases apply to the buy side of the options contract EXCEPT has an obligation (it is the seller who has an obligation if the buyer decides to exercise.)
The maximum potential loss for an investor short a put option is strike price minus premium Which of the following option positions would offer a full hedge to a short stock position? Long call (the best way to hedge a short stock position is with a long call.) A stock currently has a market value of $75 per share. If a put option on the stock has an exercise price of $60, the put option is out of the money (a put option has intrinsic value or is in the money when the current market price for the underlying asset is less than the exercise price.) When XYZ is trading at 30, an XYZ 40 put sold at 3 would be in the money (all puts are in the money when the market price is below the strike price. they are out of the money when the market price is above the strike price. they are at the money when the market price equals the strike price; they are at parity when the premium equals the intrinsic value) If a customer sold calls to open, which of the following transactions would be allowed if the options agreement was not returned signed within 15 days? Buy calls to close An investor is short 1 XYZ January 60 put at 2. This investor has received $200 for writing the put contract Students also viewedSIE practice quiz part 1 (sec 1-3)47 terms cschindler6292Plus Unit 3 Checkpoint Exam20 terms Austin_Palmier SIE unit 5 - Other Investment Vehicles13 terms max_zade SIE Unit 322 terms ryanvas Other sets by this creatorMissed Midterm25 terms mdevanss SIE - Unit 13-1527 terms mdevanss SIE - Unit 415 terms mdevanss SIE - Unit 29 terms mdevanss Other Quizlet setsSafety Quiz25 terms ehebert000 Energy Levels in Atoms (AQA AS Level)16 terms fredhoysted Unit 7 History28 terms wambosambo Which of the following options positions would offer a full hedge to a short stock position?It is possible to hedge a short stock position by buying a call option.
What position can an investor take to hedge a short stock position quizlet?The best hedge for a short stock position is to buy a call, not sell a put. If the stock price rises, the investor has the right to exercise the call and use the stock to close out the short position.
Which option position is used to generate additional income against a short stock position?Which of the following option positions is used to generate additional income against a short stock position? short (Sell) put, When one has a short stock position, borrowed shares have been sold with the agreement that the customer will buy back the position at a later date.
Which of the following options strategies are profitable in a rising market?Which of the following option strategies are profitable in a rising market? The best answer is B. Buying a call and selling a put are profitable strategies in a rising market. Buying a put and selling a call are profitable in a falling market.
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Which of the following option positions would offer a full hedge to a short stock position quizlet?
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