FIN 567 Midterm

Order ready-to-submit essays. No Plagiarism Guarantee!

Note:  All our papers are written from scratch by human writers to ensure authenticity and originality.

Question 1. Question : (TCO A) An order that closes an existing position is called a(n) __.

Question 2. Question : (TCO A) Which of the following is not a characteristic of a short call position?

Question 3. Question : (TCO E) The owner of a call that expires in the money (ignore cash settlement options) __.

Question 4. Question : (TCO C) For tax purposes, futures contracts are assumed to be __.

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

Question 6. Question : (TCO D) A Jan 50 call option is deep in the money when the __.

Question 7. Question : (TCO A) How many equity option exchanges exist in the United States?

Question 8. Question : (TCO C) What is the tax consequence when a short call that was written more than a year ago on stock expires worthless?

Question 9. Question : (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?

Question 10. Question : (TCO E) Assume the following:

Option Strike price Call price Put price

A 90 18 1

B 100 9 3

C 110 3 8

D 120 1 17

What would a short put condor include?

Question 11. Question : (TCO F) What happens to gamma as expiration is approached for options that are near the money?

Question 12. Question : (TCO G) The first rule of the cash-and-carry relationship for futures contracts is that the futures price must be _.

Question 13. Question : (TCO G) The Dow Jones Industrial Average is __.

Question 14. Question : (TCO G) A fund manager who wants to buy Japanese equities now, but won’t have the cash for three months can buy a stock index futures contract as a __.

Question 15. Question : (TCO F) Strangle writers prefer __.

Question 16. Question : (TCO F) What is the approximate value of delta for a deep-in-the-money call?

Question 17. Question : (TCO F) Vega is least for options that are __.

Question 18. Question : (TCO A) On which exchanges do options on futures trade?

Question 19. Question : (TCO D) A trader sold a Sep 50 call for $5. At expiration, the stock closed at $53. What was the net result after the trader delivered the stock?

Question 20. Question : (TCO B) In 1979–1980, the Hunt brothers manipulated which market?

Question 21. Question : (TCO B) Which of the following is the most actively traded futures contract?

Question 22. Question : (TCO E) The maximum profit in a bull put spread at expiration occurs when the stock price is _.

Question 23. Question : (TCO C) What is the limitation on the tax deductibility of net capital losses in one tax year?

Question 24. Question : (TCO D) The maximum profit in a bull call spread at expiration occurs when the stock price is _.

Question 1. Question : (TCO C) An investor bought 100 shares of stock at $40. The stock now sells for $60 and the investor writes a 65 call for $2. What is the maximum possible gain and loss in this covered call position?

Question 2. Question : (TCO D) An investor bought stock at $50 and sold a covered call with a 55 strike price for $2. The stock now sells for $60.

Part 1: What is the intrinsic value in the option? Assume the call is priced at $7.

Part 2: What is the time value in the option?

Part 3: What would you expect to happen to the value of the call and the 55 put if a shock to the market causes volatility to increase dramatically?

Question 3. Question : (TCO E) Part 1: If you hold two XYZ Dec 60 calls and the stock splits 2 for 1, what will be your resulting position?

Part 2: What is the gain or loss for the following long butterfly spread if the stock is at $302 at expiration?

Buy 1 Jun 300 call at 9

Sell 2 Jun 305 calls at 5

Buy 1 Jun 310 call at 2

Part 3: Construct a bull put spread with the following options:

Apr 40 put at 3

Apr 45 put at 6

Show the P/L result over a range of 38–47.

Question 4. Question : (TCO G) What are the independent variables in the equity options pricing model?

What would you expect deltas to be for an at-the-money call and an at-the-money put?

Why do some portfolio managers attempt to remain delta neutral?

What kind of position do straddle writers plan to maintain?