Terms 64-78

Question 1

Call Provision

Answer 1

The right of a company to call back its bond issue after a certain period of time.

Question 2

Inverse Effect

Answer 2

Interest rates and bond prices move in opposite directions.

Question 3

Call protection

Answer 3

Period of time in which bonds may not be called; usually two to three years.

Question 4

Put provision

Answer 4

Allows the holder to redeem a bond at par value on specific dates prior to maturity.

Question 5

Call option

Answer 5

Right to buy a security at a specific price for a prescribed period of time.

Question 6

Option contract

Answer 6

Equals 100 shares of a security

Question 7

Underlying Security

Answer 7

Stock on which an option is issued

Question 8

Strike Price

Answer 8

Price at which the buyer of an option can either buy the security (for a call) or sell the security (for a put)

Question 9

Premium

Answer 9

Amount paid for the purchase of an option contract; sellers receive the premium paid.

Question 10

Expiration

Answer 10

Date an option contract expires

Question 11

Intrinsic Value

Answer 11

In-the-money amount of the option contract equates to the intrinsic value.

Question 12

Time value

Answer 12

Premium less any intrinsic value equals the time value for the option contract

Question 13

Open interests

Answer 13

number of existing option contracts for a security

Question 14

Options Clearing Corp

Answer 14

Issuer and guarantor of all options contracts.