Final Ch 19/20

Question 1

Call Option

Answer 1

An option to buy a specified number of shares of stock at a stated price within a specified period

Question 2

Put Option

Answer 2

An option to sell a specified number of shares of stock at a stated price within a specified period

Question 3

Exercise( Strike) Price

Answer 3

The per-share price at which stock may be purchased from or sold to the writer of the option

Question 4

Expiration Date

Answer 4

The date an option expires

Question 5

Option Premium

Answer 5

The price paid by the option buyer to the writer of the option.

Question 6

Covered Call

Answer 6

Sale of a call option to supplement a long position in the underlying asset

Question 7

Protective Put

Answer 7

The purchase of a put option to supplement a long position in the underlying asset

Question 8

Hedge

Answer 8

A strategy using derivatives to offset or reduce the risk from exposure to an underlying asset.

Question 9

Spot Market

Answer 9

Markets for (near) immediate delivery

Question 10

Forward Market

Answer 10

An over-the-counter marketplace that sets the price of an asset for future delivery

Question 11

Futures Market

Answer 11

An auction market in which participants buy and sell standardized contracts for delivery on a specified future date

Question 12

Long position (futures)

Answer 12

An agreement to buy an asset at a specified future date at a specified price

Question 13

Short position (futures)

Answer 13

An agreement to sell an asset at a specified future date at a specified price