Series 3: Exercise

Taken from our Series 3 Online Guide

Exercise

Answer true or false.

1. _____ Horizontal spreads involve one put and one call, each with a different expiration date but the same strike price.

2. _____ In a calendar spread, the longer-term option generally has less time value than the shorter-term option.

3. _____ The time value of the deferred option in a calendar spread is more sensitive than the nearby to changes in implied volatility.

4. _____ A long calendar spread investor profits when the spread narrows; a short calendar spread investor profits when the spread widens.

5. _____ While a neutral calendar spread has limited profit potential, a long calendar spread’s potential profits are unlimited.

6. _____ A short calendar spread, also known as a reverse calendar spread, occurs when an inv

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