Which of the following is NOT true of options? I. The writer decides whether the option will be exercised. II. The writer pays the buyer the option premium. III. The buyer decides if the option will be exercised. A. I, II, III B. I C. I, II D. II
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I, II, III
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- When I buy an option, I gain rights, but I also have obligations to the option seller. True Or False?Which of the following is NOT a real option? A. An abandonment option B. An expansion option C. A stock option D. An investment timing optionWhich of the following best describes the intrinsic value of an option? The Black-Scholes-Merton price of the option The value it would have if the owner had to exercise it immediately or not at all The amount paid for the option The lower bound for the option’s price
- Choose which sentance is false. A. When you own a call option, you have the right to buy the asset. B. A option contract gives the writer the right, but not the obligation, to buy or sell a particular asset on or before a specifice date in the furture at a specific price. C. When you own a put option, you have the right to sell the asset. D. When you own a stock option, you have right, but not the obligation, to buy or sell a share of stock on or before a given date for a given price.i) Differentiate between “in the money”, “out the money” and “at the money” positions in a put option. Provide the example with the illustration.What does the seller of a put option hope will happen?
- In an option the "strike" price and "exercise" price have two completely different meanings. Group of answer choices True Falsea)describe the major differences between forward contracts and option contracts. b)discuss an arbitrage opportunity when an option is mispriced. c) identify, analyze, and discuss the following characteristics of an American call option: maximum value, intrinsic value, time value, lower bound, and payoff at expiration. d) analyze and discuss the following factors on an American call option: time to expiration, exercise price, interest rate, volatility, and dividends.Which of the following statements is true about call options? A.The holder of the option profits when the price of the underlying asset increases. B.It gives to the buyer of the option the right to sell a financial instrument within a specific time period, at a specified price. C.The holder of the option will exercise the option only if the price of the underlying asset is smaller than the strike price. D.The holder of the option receives a premium for writing the option.
- Explain the following terms, In-the money option and At-the-money option.Explain how the possible profit and loss possibilities arise for an individual who invests in a: a. A Call Option i. Be sure to explain what a Call Option is. ii. Be sure to incorporate the cost of the Call Option in your analysis. b. A Put Option i. Be sure to explain what a Put Option is. ii. Be sure to incorporate the cost of the Put Option in your analysis.Equating theoretical option price and the market option price, we can solve for implied indicators. Which is appropriate to be used as a quote for option? a) Implied strike price b) Implied volatility c) Implied risk-free rate d) None of the above