Question
1. A trader buys a call option for $6 that gives the right to purchase a share of stock for $100. In this situation the
1. A trader buys a call option for $6 that gives the right to purchase a share of stock for $100. In this situation the options strike price is
a. $100
b. $6
c. Max(100-6,0)
d. Max (6-100, 0)
e. None of the above
2. Before expiration, an American option buyer can close out his/her position by
a. exercising the option
b. selling an identical American option
c. both
3. A person that takes the option position to sell the right to sell an underlying stock is a
a. call option buyer
b. call option seller
c. put option buyer
d. put option seller
e. none of the above
4. The maximum possible value of a call option is
a. zero
b. present value of the strike price
c. its intrinsic value
d. the price of the underlying asset, for example, the stock price
e. none of the above
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