Index Options

Question 1

XMI

Answer 1

Major Market Index; Mimics Dow Jones; not very popular; Traded on the American Stock Exchange

Question 2

VLE

Answer 2

Value Line Contract; consists of common issues; not very popular

Question 3

3 ways narrow based contracts differ from index contracts?

Answer 3

Higher betas; not actively traded; European style

Question 4

VIX

Answer 4

S&P Volatility Index Options

Question 5

How does the VIX relate to the market?

Answer 5

VIX goes up, volatility goes up, values go down

VIX goes down, volatility goes down, values go up

Question 6

OEX

Answer 6

based on 100 stocks from S&P 500; American Style; Traded on the Chicago Options Board Exchange

Question 7

SPX

Answer 7

based on S&P 500; European Style; Traded on the Chicago Options Board Exchange

Question 8

How do index options settle?

Answer 8

In cash at closing value for the settlement day; payment due next business day; value is difference between strike price and closing price

Question 9

What does the Put/Call Ratio indicate?

Answer 9

Strength of market: high ratio = more puts being sold, so bearish
low ratio = more calls being sold so bullish

Question 10

When do Index Options expire

Answer 10

11:59 EST, 3rd Friday of the month

Question 11

What is the maximum life of an index LEAP contract?

Answer 11

36 months

Question 12

What is the only major index option that trades American style?

Answer 12

OEX