Question
9. If, for a $1000 premium, you buy a $100,000 call option on bond futures with a strike price of 114, and at the expiration
9. If, for a $1000 premium, you buy a $100,000 call option on bond futures with a strike price of 114, and at the expiration date the price is 110
A. your profit is $4000.
B. your loss is $4000.
C. your profit is $3000.
D. your loss is $1000.
10. Hedging by buying an option
A. limits gains.
B. limits losses.
C. limits gains and losses.
D. has no limit on option premiums.
11, An increase in the exercise price, all other things held constant, will ______ the call option premium.
A. increase
B. decrease
C. increase or decrease
D. Not enough information is given.
12. All other things held constant, premiums on options will increase when the
A. exercise price increases.
B. volatility of the underlying asset increases.
C. term to maturity decreases.
D. futures price increases.
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