End: Focused Review

Question 1

Balance Sheets

Answer 1

A balance sheet summarizes a company’s assets (what’s owned), liabilities (what’s owed) and shareholders’ equity (ownership interest) at a specific point in time (for example, at the end of a fiscal year). These three components allow the investors and managers to see what the company owns and owes, as well as the amount invested by the shareholders.

Question 2

Debit spreads

Answer 2

Debit call spread
- Bullish
- Max Gain = the strike price interval of the spread minus the premium paid
- Max loss = net premium paid;

Debit put spread
- Bearish
- Max gain = difference between strike prices - net debit
- Max loss = is the premium paid

Question 3

Credit spreads

Answer 3

Credit call - Opposite of debit call
- Bearish
- Max gain = premium received
- Max loss = strike price interval of the spread less the premium received

Credit put - opposite of debit put
- Bullish
- Max gain = premium received,
- Max loss = strike price interval of the spread less the premium received

Question 4

SMV

Answer 4

“Short market value” in a margin account with a short position. Is it equal to the market value of the shares that are shorted.

Example: if you are short $5000 of a security in your margin account, SMV is $5000.