Chapter 5 Practice Questions
1. Which of the following is a synthetic long call?
A. Long futures position and long call position
B. Long futures position and long put position
C. Short futures position and long put position
D. Short futures position and long call position
2. Which of the following could be combined with a shorted futures contract to create a synthetic short call investment?
A. Short call
B. Long call
C. Short put
D. Long put
3. A synthetic long futures position consists of:
A. Any long call and short put for the same underlying contract
B. Any short call and long put for the same underlying contract
C. A long call and short put at the same strike and expiration for the same underlying contract
D. A short call and long put at the same strike and expiration for the same underlying contract
4. A forward conversion combines which two of the following?
I. A long futures contract
II. A short futures contract
III. A short call and a long put on the futures contract
IV. A long call and a short put on the futures contract
A. I and III
B. I and IV
C. II and III
D. II and IV
5. Suzie is long an April dry whey futures contract. If she then buys a put on the same contract, she has created which of the following?
A. A synthetic put
B. A synthetic call
C. A forward conversion
D. A synthetic short futures contract
6. Which of the following best describes the difference between a futures conversion and a synthetic futures contract?
A. Conversions always include a put option, while a synthetic futures contract does not.
B. Conversions always include a call option, while a synthetic futures contract does not.
C. Conversions include multiple synthetic futures.
D. Conversions include an actual futures contract to go along with a synthetic futures contract.
7. Reba enters the following options straddle:
Short Sep Coal 92.60 Call