1. Suppose a trader is long on an underlying stock. Which of the following would be the best hedging strategy against the long stock position?

a.

Long a call on the underlying stock option.

b.

Long a put on the underlying stock option.

c.

Short a call on the underlying stock option.

d.

Short a put on the underlying stock option.

2.

Assume the OKLI is currently at 910. You write one March 910 OKLI call option at 20.5 points and you also write one March 910 OKLI put option at 18.0 points. Assume there are 45 days to expiry. What is the common name for this strategy?

a.

Short Strangle

b.

Short Straddle

c.

Long Strangle

d.

Long Straddle

3.

All of the following are true except:

a.

The higher the strike price, the greater the value of a put option.

b.

The lower the stock price, the greater the value of a put option.

c.

The higher the stock price, the greater the value of a call option.

d.

The higher the strike price, the greater the value of a call option.