Module 1 Lesson 2

Question 1

A call option give the buyer of the call option the right to?

Answer 1

buy the underlying stock at the strike price, any time on or before the expiry date.

Question 2

When ever an option buyer exercises their right the options sell gets?

Answer 2

Assigned

Question 3

When the strike price is lower than the market price of the underlying it is called?

Answer 3

In the Money

Question 4

How do you calculate the P&L for a Long Call Option?

Answer 4

(Market Price of the underlying - Strike Price - Option Premium) x 100

Question 5

When the Maket Price of the Underlying is way above the strike price what is it called?

Answer 5

Deep in the Money

Question 6

Buying a call gives you unlimited?

Answer 6

Upside

Question 7

When the underlying and the strike price are the same that is called?

Answer 7

At the Money

Question 8

When the strike price is higher than the Market price that is called?

Answer 8

Out of the Money

Question 9

Seller of a call option benefits when?

Answer 9

When the underlying is lower than or at the strike price

Question 10

How to you calculate P&L in a Short Call Option?

Answer 10

(Strike Price - Market price of the Underlying + Option Premium) x 100

Question 11

How do you calculate selling a call option when the buyer is In the Money?

Answer 11

Depending how much the option buyer was In the Money it would be a loss.

Ex: ($145-$200+$5) x 100 = -$5000