Jennifer previously wrote 10 CVS Aug 45 puts for 6 each when the market price of CVS was 46. CVS is currently trading at 41 and the options are one week away from expiration. Jennifer would like to buy her way out of that position. If she does, how would the the second option order be marked?

Opening sale.

Opening purchase.

Closing sale.

Closing purchase.

After a bad experience flying with Beta Airlines, Mr. Giordano thinks that Beta stock is overvalued. He is currently short 1,000 shares of the company. He is now concerned with the potentially unlimited risk he is currently exposed to and would like to use options to hedge that risk. What would be his best option position?

Buy 10 Beta Airlines calls.

Buy 10 OEX (S%P 100) index calls.

Sell 10 Beta Airlines calls.

Buy 10 Beta Airlines puts.

Mr. Gomez had bought 1 CVS Oct 65 call at 8 when the market price of CVS stock was 64. CVS is currently trading at 69, and Mr. Gomez decides that now would be a good time to sell the previously purchased option. The second option order ticket would be marked:

Opening sale.

Opening purchase.

Closing sale.

Closing purchase.

Alamo Investment Company just purchased Submarine stock for $50. It engages in a covered call strategy whereby it sells call options on Submarine stock. A call option on Submarine stock is available with an exercise price of $52, a one-year expiration date, and a premium of $2. Assume that the buyers of the call option will exercise the option on the expiration date if it is feasible to do so. Alamo will sell the stock at the end of one year even if the option is not exercised. Determine the net profit per share for Alamo based on the following possible prices for Submarine stock at the end of one year is $55.

-$4 on a per share basis

$1 on a per share basis

$2 on a per share basis

$4 on a per share basis

An investor is long 1 Shell Aug 30 put. Shell stock currently has a market value of 25. Which of the following is TRUE?

The Aug 30 put is in the money by 5 points.

The Aug 30 put is at the money.

The Aug 30 put is out of the money by 30 points.

The Aug 30 put has no intrinsic value.

You are an advisor for Mr. Gonzalez, who owns 5,000 shares of EmCee Properties. He thinks that the company is unlikely to grow much over the next year as interest rates on mortgages have risen. He likes the company and does not want to sell his shares, but would like to know how to generate extra income. You tell him the following about covered calls:

writing calls against his stock position is a conservative strategy for generating income.

writing calls against his stock position is a conservative strategy but is ineffective for generating income.

selling covered calls is very aggressive but has a solid chance of generating substantial income.

buy puts is the best hedge against this position.