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.
General Regulations


Related Articles
  1. Professionals

    Summary And Review

    Summary And Review
  2. Forex Education

    7. Long Strangle

    If you want to trade options but are short on strategies, we can help.
  3. Professionals

    Straddles and Strangles

    CFA Level 1 - Straddles and Strangles. Discusses how strangles and straddles are used by traders. Shows how to create these positions using put and call options on stocks.
  4. Professionals

    Options: Calls and Puts

    CFA Level 1 - Options: Calls and Puts. Learn the two main types of option derivatives and how each benefits its holder. Provides an example multiple choice question for an option.
  5. Options & Futures

    Synthetic Options Provide Real Advantages

    Participate in options trading trading that is simpler, less expensive and easier to manage.
  6. Options & Futures

    4 Options Strategies To Know

    Here is a quick introduction to four options strategies that traders should know.
  7. Fundamental Analysis

    4 Popular Options Strategies for 2016

    Learn how long straddles, long strangles and vertical debit spreads can help you profit from the volatility that stock analysts expect for 2016.
  8. Professionals

    Alternative Investments

    Alternative Investments
  9. Options & Futures

    Options Basics: What Are Options?

    An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. An option, just like a stock ...
  10. Options Seller Traders

    In contrast to buying options, an options seller trader sells stock options. This comes with an obligation to sell the underlying equity to a buyer if that buyer decides to exercise the option ...
RELATED TERMS
  1. Strangle

    An options strategy where the investor holds a position in both ...
  2. Iron Butterfly

    An options strategy that is created with four options at three ...
  3. Iron Condor

    An advanced options strategy that involves buying and holding ...
  4. Bear Call Spread

    A type of options strategy used when a decline in the price of ...
  5. Strike Width

    The difference between the strike price of an option and the ...
  6. Straddle

    An options strategy in which the investor holds a position in ...
RELATED FAQS
  1. What options strategies are best suited for investing in the financial services sector?

    Learn the options strategies top traders use to take advantage of the volatility in the financial services sector and the ... Read Answer >>
  2. What's the difference between a straddle and a strangle?

    Straddles and strangles are both options strategies that allow the investor to gain on significant moves either up or down ... Read Answer >>
  3. What options strategies are best suited for investing in the aerospace sector?

    Learn how investors profit from volatility in the aerospace sector by employing options strategies, which include the long ... Read Answer >>
  4. What options strategies are best suited for investing in the retail sector?

    Learn how savvy investors employ options strategies such as the long straddle and long strangle to profit from the volatile ... Read Answer >>
  5. A Straddle

    A. Speculates on the rate of change of a security's market price. B. Speculates on the rate of change of an option's market ... Read Answer >>
  6. What options strategies are best suited for investing in the oil & gas drilling sector?

    Invest in the oil and gas drilling sector with confidence by employing one of several winning options strategies that work ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center