Primary component in theoretical options pricing calculations

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  • Primary component in theoretical options pricing calculations


    1. The price of ABCD is $25. You establish the following position:

    Short 1 ABCD 25 Call @ 2

    If the delta of the call is 0.50, what would be the theoretical price of the option if ABCD increased by $1.00?

    a. $1.50

    b. $2.50

    c. $3.00

    d. $4.00

    e. $4.50

    2. Which one of the following is a synthetic long put?

    a. Long stock, short put

    b. Long stock, short call

    c. Long stock, long put

    d. Short stock, long put

    e. Short stock, long call

    3. You establish the following position:

    Short 1 ABCD 320 Put @ 6

    If the delta of the put is 0.50 and the gamma is 0.03, what would the new delta be if ABCD decreases from 321 to 320?

    a. 0.47

    b. 0.50

    c. 0.53

    d. 0.56

    e. 0.60

    4. Which of the following choices is a primary component in theoretical options pricing calculations?

    a. Volatility

    b. Annual interest rate

    c. Stock price

    d. Days to expiration

    e. Strike price

    f. All of the above

    5. You have established the following positions:

    Long 500 ABC Nov 1240 Calls @ 5

    Long 500 ABC Nov 1205 Puts @ 6

    What is the traditional margin requirement?

    a. $500,000

    b. $550,000

    c. $600,000

    d. $700,000

    6. Which one of the following choices measures the rate of decline in value of an option due to time decay?

    a. Delta

    b. Gamma

    c. Theta

    d. Vega

    7. With everything being equal as time passes in options, which one of the following is true?

    a. In the money options delta decrease and out of money options delta increase

    b. In the money options delta increase and out of money options delta increase

    c. Both in the money options delta decrease and out of money delta decrease

    d. In the money delta increase and out of money options delta decrease

    8. Which one of the following choices measures the change in price of an option for a one point move in the underlying asset?

    a. Delta

    b. Gamma

    c. Theta

    d. Vega

    9. To hedge a short stock position in ABCD, you can do all of the following EXCEPT what?

    a. Buy at the money ABCD calls to open

    b. Buy in the money ABCD calls to open

    c. Sell out of money ABCD puts to open

    d. Sell out of money ABCD calls to open

    10. In portfolio margin, equity options and stocks are tested with +/- 15% price changes. If you buy $100,000 of ABCD stock, what is the portfolio margin requirement?

    a. $15,000

    b. $25,000

    c. $30,000

    d. $50,000

    11. You opened several accounts with XYZ broker. Which of the following accounts is under identical ownership as your individual portfolio margin account?

    a. Your Roth Individual Retirement Account

    b. Your Individual Margin Account

    c. Your Joint Account with Rights of Survivorship

    d. Your Corporate Account

    e. Your 401(k) Account

    12. You have already been approved for covered call writing but must be re-approved for which one of the following in order to participate in portfolio margining?

    a. Purchasing Straddles

    b. Purchasing Spreads

    c. Purchasing Options

    d. Short-selling

    e. Selling Uncovered Options

    13. All LEAPS are what?

    a. Unlisted derivatives of equity indices

    b. Options on commodities and futures contracts

    c. Issued with longer life than standard options

    d. Options on Exchange Traded Funds

    e. Options on individual stocks

    14. If you write a call, hoping to benefit from the time decay of the options premium, which one of the following measures would you use?

    a. Theta, expressed in percentage

    b. Theta, expressed in dollars

    c. Delta, expressed in percentage

    d. Delta, expressed in dollars

    e. Gamma, expressed in percentage

    15. Which one of the following choices measures how the delta of an option will change relative to a one point move in the underlying asset?

    a. Delta

    b. Gamma

    c. Theta

    d. Vega

    e. Rho

    16. Which one of the following is a synthetic long call?

    a. Long stock, short put

    b. Long stock, short call

    c. Short stock, long put

    d. Long stock, long put

    e. Short stock, long call

     

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