Options Basics Flashcards
1
Q
How do dividend rates affect option premiums?
A
Higher dividend rate; lower Call premium
Higher dividend rate; higher Put premium
2
Q
Hod do interest rates affect option premiums?
A
Higher interest rate; higher call premium
Higher interest rate; lower put premium
3
Q
To establish a contract, what does the HOLDER do?
A
Makes an OPENING PURCHASE
4
Q
If holder trades contract to someone, what does he do?
A
Closes position with a CLOSING SALE
5
Q
To establish a contract, what does the WRITER do?
A
Makes an OPENING SALE of contract
6
Q
If writer trades the contract to someone, what does he do?
A
Makes a CLOSING PURCHASE
7
Q
What is the maximum loss for the HOLDER of any options contract?
A
The premiums paid
