1. Which is the most profitable option strategy if you anticipate the underlying stock price will increase substantially?

   		Covered call.
   		Writing a straddle.
   		Buying a spread.
   		Buying a call.

2. You just purchased one ABC call option contract (exercise price $30) and one ABC put option contract (exercise price $30). The call premium is $3 and the put premium is $2. Your maximum potential loss from this position is ______________.

   		$200
   		$300
   		$500
   		unlimited

3. You predict that ABC stock price will show unusually low volatility in the coming month. Which of the following is the best strategies to profit from your prediction?

   		Covered call.
   		Protective put.
   		Sell straddle.
   		Short stock.

4. Which of the following is an advantage of option investments when compared to stock investments?

   		Options provide more leverage.
   		Options will Expire.
   		Options returns are guaranteed by the OCC.
   		All of the above are advantages.

5. A protective put position is equivalent to a ______________.

   		write put
   		write call
   		buy put
   		buy call

6. The maximum potential profit of a protective put position is ______________.

   		stock price - exercise price + premium
   		exercise price - stock price + premium
   		exercise price - premium
   		unlimited

7. The current stock price of ABC is $50 and you just bought one ABC August 45 put option contract for a premium of $2 per share. Assume you hold the option until the expiration date and the stock price of ABC sells for $48 on that date. What is the rate of return of your investment?

   		-100%
   		-50%
   		0%
   		100%

8. You just bought 100 shares of ABC Company for $22 per share and sold one ABC call option contract for a premium of $4 per share. The call option has a strike price of $20 and expires in one month. The maximum profit that you could realize from this strategy is ______________.

   		$100
   		$200
   		$300
   		$400

9. You just bought one XYZ August 50 call option contract for a premium of $4 per share. Assume the current stock price of XYZ is $51 and that you hold the option until the expiration date when ABC stock sells for $52 per share. What is the rate of return of your investment?

   		0%
   		25%
   		50%
   		100%

10. The current stock price of ABC is $22 and there is an ABC put option with a strike price of $20. The put option is ______________.

    		out of the money
    		in the money
    		at the money
    		None of the above.

11. The Options Clearing Corporation guarantees ______________.

    		the put-call parity
    		the performance of options contracts
    		no investor will lose money
    		None of the above.

12. You buy one XYZ call option contract with $25 strike price and sell one XYZ call option contract with $30 strike price. Both options expire in one month. The 25 call premium is $2 and the 30 call premium is $1. What is the maximum potential profit of your position?

    		$400
    		$500
    		$600
    		unlimited

13. You have a protective put position that consists of 100 shares of ABC stock, which you paid for $28 per share, and one ABC put option contract, which you paid a premium of $5 per share. The put option has a strike price of $30 and will expire in 2 months. What is the maximum potential loss of your protective put?

    		$200
    		$300
    		$500
    		$700

14. You just bought some shares of IBM's stock and would like to use either a covered call or protective put to provide some hedge against unexpected declines in the stock value. Which of the following is an advantage of a covered call?

    		The maximum potential loss of a covered call is lower.
    		The put is less expensive than the call.
    		The potential profit is unlimited.
    		The option premium is an income.

15. American options can be exercised ______________.

    		in America only
    		on the expiration date
    		on or before the expiration date
    		None of the above.