3. The strategy by combining a short position in call and a short position in put of the same exercise price and expiration is called a _____________.

Multiple Choice

a) time spread

b) long straddle

c) short straddle

d) money spread

4. You have XYZ stock in your portfolio while you are shorting a call option on XYZ stock. This combined strategy is called a __________.

Multiple Choice

a) naked call

b) call straddle

c) covered call

d) money spread

5. The strategy is called a ___________ when you own an ABC stock and also hold a long position on ABC's put option.

Multiple Choice

a) long strip

b) naked put

c) protective put

d) short stroll

6) The value of a listed put option on a stock is lower when:

I. The exercise price is higher.

II. The contract approaches maturity.

III. The stock decreases in value.

IV. The premium of the call is higher.

Multiple Choice

a) II, III, and IV only

b) I and II only

c) I, II, and III only

d) II and IV only

e) I, III and IV only

7. The value of a listed call option on a stock is higher when:

I. The exercise price is lower.

II. The contract approaches maturity.

III. The stock price declines.

IV. The put option's premium is higher.

Multiple Choice

a) I only

b) II only

c) I and II only

d) I, II and IV only

e) I, II, III and IV

8. You buy one Huge-Packing August 50 call contract and one Huge-Packing August 50 put contract. The call premium is $1.25, and the put premium is $4.50. Your highest potential loss from this position is _________.

Multiple Choice

a) $125

b) $450

c) $575

d) unlimited