Options - Answers

  1. D. A would be correct for an in-the-money option.
  2. A. II is at-the-money, not in it.
  3. A. The others are bearish strategies.
  4. D. The rest are false.
  5. C. The rest are false.
  6. B. Strangles use different strike prices, both of which are out of the money.
  7. C.
  8. A. Straddles are used when the investor is unsure of the market's direction
  9. B. Strike price + net premium. The mnemonic device is Calls Add to Lower (CAL)
  10. C A is incorrect as synthetic options utilize a combination of futures and options. A future obligates buyer and seller alike, whereas options obligate only sellers.
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