Question 1.1.(TCO A) Which of the following is not an advantage of buying a call option?(Points : 5)

Lower cost than the underlying issue Limited loss potential Guaranteed income Large potential gains

Question 2.2.(TCO A) Which of the following is not a characteristic of a short put position?(Points : 5)

Protection of a stock position Limited potential gains Lower margin required than selling short the underlying issue Time value will be earned

Question 3.3.(TCO E) The writer of a put that expires in the money (ignore cash settlement options) ________.(Points : 5)

must accept delivery of the underlying asset may accept delivery of the underlying asset may deliver the underlying asset must deliver the underlying asset

Question 4.4.(TCO C) For tax purposes, futures contracts are assumed to be ______.(Points : 5)

open at year-end closed at year-end closed on thesettlement date closed on thetrade date

Question 5.5.(TCO C) The agency that administers the Commodity Exchange Act is ____.(Points : 5)

NYSE AMEX SEC CFTC

Question 6.6.(TCO D) An order that closes an existing position is called ______.(Points : 5)

an ending order aterminal order afinal order an offsetting order

Question 7.7.(TCO A) Clearinghouses limit their risk by _______.(Points : 5)

not taking any positions requiring margin deposits from members setting minimum margin requirements All of the above

Question 8.8.(TCO C) Market makers on option exchanges have a responsibility to ______.(Points : 5)

trade for their own account trade for their friends stand ready to buy and sell options in specific classes help other market makers who are in financial difficulty

Question 9.9.(TCO D) Assume that put and call options with a $50 strike price expire with the stock at $70. Which of the following statements is correct?(Points : 5)

Both options are in the money. Both options are out of the money. The call is in the money. The put is in the money.

Question 10.10.(TCO E) What is a long call butterfly spread for options with strike prices of 30, 40,and 50?(Points : 5)

Buy one 30, sell two 40s, and buy one 50 Long one 30 andshort two 50 Long two 30, short two 40, and long two 50 Short two 30, long four 40, and short two 50

Question 11.11.(TCO F) Straddle traders prefer ______.(Points : 5)

very high gamma unchanging gamma low gamma high gamma

Question 12.12.(TCO G) The first rule of the cash-and-carry relationship for futures contracts is thatthe futures price must be _______.(Points : 5)

less than or equal to the spot price plus the carrying charge to future delivery greater than or equal to the spot price plus the carrying charge to future delivery equal to the spot price greater than the spot price

Question 13.13.(TCO G) The size of the E-mini S&P 500 futures contract is _______.(Points : 5)

10 times the S&P 500 stock index 50 times the S&P 500 stock index 100 times the S&P 500 stock index 200 times the S&P 500 stock index

Question 14.14.(TCO G) When using stock index futures to hedge a portfolio of stocks, one way to improve the results of the hedge is to account for _______.(Points : 5)

the difference in volatility of the portfolio and the futures contract the difference in expected returns of the portfolio and the futures contract the difference in trading volume of the portfolio and the futures contract None of the above

Question 15.15.(TCO F) What happens to delta as expiration is approached for options that are far out of the money?(Points : 5)

It remains stable. It tends to rise. It tends to change more suddenly. It approaches zero.

Question 16.16.(TCO F) What is the approximate value of delta for an at-the-money call?(Points : 5)

1.0 0.5 -0.5 0.1

Question 17.17.(TCO F) Vega is least for options that are ______.(Points : 5)

out of the money in the money near the money deep in the money

Question 18.18.(TCO A) Options on foreign currencies trade primarily on _______.(Points : 5)

the New York Stock Exchange the Chicago Board Options Exchange the American Stock Exchange the Philadelphia Stock Exchange

Question 19.19.(TCO D) A trader sold a Sep 50 put for $5. At expiration, the stock closed at $53. What was the net result after the trader delivered the stock?(Points : 5)

$3 profit $2 profit $1 loss $5 profit

Question 20.20.(TCO B) In 19791980, the Hunt brothers manipulated which market?(Points : 5)

Cotton Gold Silver Soybean

Question 21.21.(TCO B) What is an important way for traders and investors to protect themselves from illegal activities?(Points : 5)

Keep your funds and your money manager separate. Make sure the manager of your funds has no authority to withdraw your funds. Have your funds deposited with an independent clearing organization. All of the above

Question 22.22.(TCO E) The maximum profit in a bull put spread at expiration occurs when the stock price is _______.(Points : 5)

the strike price of the short put or higher the strike price of the long put halfway between the two strike prices None of the above

Question 23.23.(TCO C) What is the limitation on the tax deductibility of net capital losses in one tax year?(Points : 5)

$1,000 $3,000 $3,500 There is no limit.

Question 24.24.(TCO D) The combination of selling a put and buying another put with the same expiration and a higher strike price is called a ______.(Points : 5)

bull put spread bear put spread straddle strangle