Derivatives Markets Flashcards
Which of the following statements regarding call options is true?
A. A call option would not be exercised if the market value of the asset to be purchased exceeds the strike price.
B. A call option is in the money when the strike price is below the asset’s value.
C. Profits on call options increase when the asset value falls.
D. A call option is at the money when the strike price exceeds the asset’s value.
B
Which of the following statements regarding call options is true?
A. A call option would not be exercised if the market value of the asset to be purchased exceeds the strike price.
B. A call option is in the money when the strike price is below the asset’s value.
C. Profits on call options increase when the asset value falls.
D. A call option is at the money when the strike price exceeds the asset’s value.
A
Which of the following statements regarding put options is true?
A. A put option is in the money when the strike price exceeds the asset’s value.
B. Profits on put options increase when the asset increases in value.
C. A put option is in the money when the strike price is below the asset’s value.
D. A put option will be exercised only if the strike price is lower than the price of the underlying asset.
B
Which of the following changes would increase the value of a call option?
A. Lower volatility of the value of the underlying asset.
B. Longer time to maturity.
C. Lower interest rate.
D. Higher strike price.
C
Which of the following statements regarding forward contracts is true?
A. Forward contracts are traded in organized exchanges.
B. There is marking to market in a forward contract.
C. In a forward contract no money changes hands until delivery date.
D. Each trader in a forward contract must establish a margin account at initial execution of a trade.
D
Which of the following statements regarding the value of a call option is false?
A. If the price of the underlying asset increases, the value of the call increases.
B. If the expiration date of the option is extended, the value of the call increases.
C. If the volatility of the value of the underlying asset decreases, the value of the call increases.
D. If the exercise price increases, the value of the call decreases.
C
