Derivatives (L8) Flashcards
1
Q
Options
A
2
Q
3 reasons to invest in Options
A
Hedging
Speculation
Income
3
Q
Option Premiums
A
4
Q
Intrinsic Value
A
5
Q
Gain OR Loss using OPTIONS
A
6
Q
Covered CALL
A
7
Q
Married PUT
A
- Involves BUYING a Put Option on a stock OR index that is currently owned by the investor
- “portfolio insurance”
If the investor owns a diversified portfolio of common stocks
8
Q
Straddles
A
9
Q
Collar (or Zero-Cost Collar)
A
10
Q
Option Pricing Models
A
Black/Scholes Model
Put/Call Parity
Binomial Pricing Model
11
Q
Black/Scholes Model
A
12
Q
PUT/CALL Parity
A
Attempt to Value a PUT option based on the value of the corresponding CALL Option.
13
Q
Binomial Pricing Model
A
14
Q
Option Taxation
A
15
Q
Long Term Equity Anticipation Securities (LEAPS)
A
- LEAPS have LONGER EXPIRATION PERIODS than traditional options
○ Expiration periods = 2 or more years - Premiums associated with LEAPS is higher because of extended time period
16
Q
Warrants
A
17
Q
FUTURES
A
