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Series 7: Lecture Review > Unit 10: Options > Flashcards

Unit 10: Options Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Days for customers to sign and return the option agreement?

A

15 days

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2
Q

Call Intrinsic Value

A

Stock $ - Exercise $

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3
Q

Put Intrinsic Value

A

Exercise $ - Stock $

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4
Q

Option Premium =

A

Intrinsic Value + Time Value

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5
Q

Best hedge if long stock…

A

buy a put

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6
Q

Protective put

A

Long stock
Long put

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7
Q

Covered Call

A

Long stock
Short Call

Generate premium income but limit stock appreciation

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8
Q

Long Straddle

A

Buy 1 call
Buy 1 Put

Volatility play

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9
Q

Short Straddle

A

Sell 1 call
Sell 1 put

Seeks neutrality, income with lots of risk

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10
Q

Call’s dominant position

A

Lower strike price

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11
Q

Put’s dominant position

A

Higher strike price

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12
Q

Calendar Spread

A

Later expiration is dominant

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13
Q

Debit Spread

A

Buying dominant position
spread Widen

premium you paid

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14
Q

Credit Spread

A

Selling dominant position
spread Narrow

premium you earned

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15
Q

Vertical Spread

A

Strike $ is different

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16
Q

Horizontal Spread

A

Months are different

17
Q

Diagonal Spread

A

Strike $ and Months are different

18
Q

Butterfly Spread

A

Options needed: 4
Different strike prices: 3
Expiration dates: 1

Profit in the middle

19
Q

Collar

A

Long Stock
Long Put
Short Call

Downside protection & Income

20
Q

Long Straddle

A

Long Put
Long Call

Volatility is expected

21
Q

Short Straddle

A

Short Put
Short Call

Hopes option will expire, neutral

22
Q

Options in ERISA-qualified retirement plans?

A

Yes, as long as they conform to the objective

23
Q

Index Options

A

Use: portfolio insurance, generate income
100x multiplier
Writer delivers CASH on next business day

24
Q

FX Options

A

Hedge or speculate against currency risk
100x multiplier
Writer delivers CASH on next business day

25
Q

Position Limits

A

250,000 contracts on each side:
Bullish: long calls, short puts
Bearish: short calls, long puts

Series 7: Lecture Review (20 decks)

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