Which of the following statements is correct regarding option contracts?

• A put option gives the holder the right to sell, and the writer the obligation to buy the underlying asset
• A put option gives the holder the obligation to sell, and the writer the right to buy the underlying asset
• A put option gives the holder the right to buy, and the writer the obligation to sell the underlying asset
• A put option gives the holder the obligation to buy, and the writer the right to sell the underlying asset

Which of the following statements is a reason why a speculator would buy and sell futures contracts?

• To make a profit from the movement of the price of the underlying commodity
• As a means of pre-selling inventories at current market prices
• To lock in a price for the underlying commodity that they wish to own in the future
• To set a limit on possible losses resulting from owning the underlying commodity
• The current share price for ABC Inc is $32.00. An October 30 call is priced a $3.45, an October 34 put is priced at $1.40, an October 30 put is priced at $1.30 and an October 34 call is priced at $3.30. Which of these four options are in-the-money?
• October 34 put
• October 30 call
• October 30 call and October 34 put
• October 34 call and October 34 put

Which of the following statements is the best explanation for the difference between "intrinsic" and "time" value of options?

• "Intrinsic value" is the value of a derivative and "time value" is the value of the underlying asset
• "intrinsic value" is the value of call options and "time value" is the value of put options
• "Intrinsic value is the value of certainty and "time value" is the value of uncertainty
• "Intrinsic value is the value of trading disclosure and "time value" is the value of trading privacy

A stock trades for $11 per share. It announces a rights offering where 3 rights, plus $10, will qualify the investor for one more treasury share. However, the investor acquired the rights only two business days before the record date. This means the share value is "ex-rights". What is the value of one right now?

• $0.25
• $0.33
• $0.50
• $1.00

Gabriella is discussing "call" options with her client Ronaldo. What is the correct statement regarding the "exercise price" for an option?

• The exercise price represents that maximum purchase price
• The exercise price represents that minimum purchase price
• The exercise price represents that minimum selling price
• The exercise price represents that maximum selling price

The range and complexity of options and forwards trading are practically limitless. But the two main reasons for buying or selling these types of financial products are either (1) as a ________ strategy to protect against fluctuating commodity prices or (2) as a form of ________ to profit from correctly predicting future commodity prices.

• Tax minimization / income-splitting
• Risk management / speculation
• Good faith / disclosure
• Gambling / risk management

Which of the following features is NOT associated with a futures contract?

• It is a contract between three parties - a buyer, a seller and an intermediary
• The parties are required to participate in the future trade
• It trades only on a licensed exchange
• The underlying asset can be either a financial asset or a commodity

Which of the following combinations of features would be advantages of buying derivatives through an exchange rather than "over-the-counter"?

• Expiration Dates - Customized Products - Privacy
• Illiquid - Ease of Termination - Privacy
• Standardized Terms - Public Disclosure - Minimal Default Risk
• Unregulated - Minimal Default Risk - Customized Products

A stock trades for $11 per share. It announces a rights offering where 3 rights, plus $10, will qualify the investor for one more treasury share. What is the value of one right, during the "cum-rights" period?

$0.25

$0.33

$0.50

$1.00