Exercise

Answer the following questions.

1. For options traders, bullish positions include which of these positions:

I. Buying calls

II. Selling calls

III. Buying puts

IV. Selling puts

A. I and III

B. I and IV

C. II and III

D. II and IV

2. XYZ Jan 55 calls currently sell out of the money. They may be bought in the market at a $2 premium. The going price of this option represents:

A. Intrinsic value only

B. Time value only

C. Both intrinsic and time value

D. Time value minus intrinsic value

3. Which of the following options is most likely to be furthest from its expiration date?

A. XYZ Mar 30 put @ 4, XYZ is trading at $28.95

B. XYZ Mar 30 call @ 5, XYZ is trading at $31.05

C. XYZ Mar 30 put @ 4, XYZ is trading at $32.75

D. XYZ Mar 100 call @ 5, XYZ is trading at $102.90

4. Listed options are issued and guaranteed by:

A. Options Clearing Corporation

B. Chicago Board Options Exchange

C. Companies that issue the securities

D. Exchange where the option is listed

5. FINRA has a 25,000 position limit for FINRA members that are not members of an options exchange for calls and puts. Which of the following positions held by a customer would violate the FINRA 25,000 position limit on Acme contracts?

A. Long 2,000,000 shares of Acme and short 10,000 calls on Acme

B. Long 20,000 calls on Acme and long 10,000 puts on Acme

C. Short 20,000 puts on Acme and long 10,000 Acme stock

D. Short 20,000 puts on Acme and long 10,000 calls on Acme

6. Which of the following statements about open interest is not true?

A. Open interest changes throughout the trading day.

B. Open interest is generally higher when the stock price is near the strike price and lower as the stock prices deviates from the strike.

C. Increasing open interest means more opening than closing positions.

D. Open interest measures the increase or decrease in an opti