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Question 1: What is the difference between an American and European Option? Question 2: If I take a short position on a call and the
Question 1: What is the difference between an American and European Option? | |||||||||
Question 2: If I take a short position on a call and the price of the associated FALLS what happens to my investment. | |||||||||
Question 3: What are the three growth stages of a firm? | |||||||||
Bonus/Extra Credit Question 4: Name one reason why I would purchase options OTHER THAN financial return | |||||||||
EXERCISE: You were just about to invest in a toy factory then your friend told you that you could make more money investing in options than you could purchasing stocks. | |||||||||
Question 5: Before doing the math please provide one reason for and one reason against this argument | |||||||||
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Rather than buying the stock of company A you decide to purchase the options instead you consider four options plays based on the following assumption: | |||||||||
"Factory A offers $5.00 a share. Dividends are expected to grow at 6% per year and the current dividend is $1 per share. The expected rate of return is 20%. What should the current stock price be?" | |||||||||
Question 6: What type of option would I purchase to trade of the above assumption? (Call v Put & Short v. Long) | |||||||||
Question 7: Should you purchase a American or European Option? | |||||||||
Bonus/Extra Credit Question 8: If you were 100% Factory A's stock would achieve a 20% return what is the most aggressive strike price you would purchase? | |||||||||
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