Hedge fund/active strategies

1) A straddle trade:

A. is a volatility trade

B. is constructed by buying the asset and selling a Call option on the asset

C. both (A) and (B) are correct

2) A covered call strategy:

A. involves buying stock and buying a Call option

B. involves shorting stock and writing a Call option

C. involves buying stock and writing a Call option

3) A covered call strategy:

A. involves potentially unlimited profits

B. involves potentially unlimited losses

C. involves losses that are potentially larger than profits

4) With a protective put strategy, an advantage of selecting a low strike price for the put option is:

A. it provides stronger protection than a put with a higher strike price

B. it costs less to buy than a put option with a higher strike price

C. the cash inflow from the premium is higher than for a put option with a higher strike price

D. the maximum loss is smaller than for a put option with a higher strike price