Series 7- Options With Complete Solutions
100% Correct
If an equity call holder exercises a contract, the holder must deliver:
A. cash in 1 business day
B. stock in 1 business day
C. cash in 2 business days
D. stock in 2 business days - ANSWER C. cash in 2 business days
The holder of a call on a listed stock exercises. The holder must:
I deliver stock
II deliver cash
III take delivery of stock
IV deliver cash - ANSWER C. II and III- Deliver cash & take delivery of stock
When the writer of an equity call contract is exercised, the writer must deliver:
A. cash in 1 business day
B. stock in 1 business day
C. cash in 2 business days
D. stock in 2 business days - ANSWER D. stock in 2 business days
A customer would sell call contracts because the customer:
A. is bullish on the underlying security
,B. is bearish on the underlying security
C. wishes to generate earned income
D. wishes to defer taxation of gains on the underlying stock - ANSWER B. is bearish on
the underlying security
A customer would buy put contracts because the customer:
A. is bullish on the underlying security
B. is bearish on the underlying security
C. is neutral on the underlying security
D. wants to produce ordinary income - ANSWER B. is bearish on the underlying security
An investor buys 1 ABC Jan 45 Put @ $3. The investor decides to exercise his option
contract. The holder has the right to:
A. buy stock at $42 per share
B. buy stock at $45 per share
C. sell stock at $ 42 per share
D. sell stock at $ 45 per share - ANSWER D. sell stock at $ 45 per share
An investor writes 1 ABC Jan 45 Put @ $ 3. The contract subsequently is exercised. The
writer is obligated to:
A. buy stock at $ 42 per share
B. buy stock at $ 45 per share
C. sell stock at $ 42 per share
D. sell stock at $45 per share - ANSWER B. buy stock at $45 per share
, A customer would sell put contracts because the customer:
A. is bullish on the underlying security
B. is bearish on the underlying security
C. wishes to generate ordinary income
D. wishes to defer taxation of gains on the underlying stock - ANSWER A. is bullish on
the underlying security
The premium on a call or put option is the:
A. exercise price of the contract
B. cost of the contract
C. market price of the underlying instrument
D. cost of the underlying instrument - ANSWER B. cost of the contract
The "cost" of an option contract is the:
A. premium
B. exercise price
C. market price of the underlying security
D. intrinsic value - ANSWER A. premium
The option premium is:
I the price of the contract
II the strike price of the contract
III determined by supply and demand in the marketplace
IV determined by the Options Clearing Corporation
100% Correct
If an equity call holder exercises a contract, the holder must deliver:
A. cash in 1 business day
B. stock in 1 business day
C. cash in 2 business days
D. stock in 2 business days - ANSWER C. cash in 2 business days
The holder of a call on a listed stock exercises. The holder must:
I deliver stock
II deliver cash
III take delivery of stock
IV deliver cash - ANSWER C. II and III- Deliver cash & take delivery of stock
When the writer of an equity call contract is exercised, the writer must deliver:
A. cash in 1 business day
B. stock in 1 business day
C. cash in 2 business days
D. stock in 2 business days - ANSWER D. stock in 2 business days
A customer would sell call contracts because the customer:
A. is bullish on the underlying security
,B. is bearish on the underlying security
C. wishes to generate earned income
D. wishes to defer taxation of gains on the underlying stock - ANSWER B. is bearish on
the underlying security
A customer would buy put contracts because the customer:
A. is bullish on the underlying security
B. is bearish on the underlying security
C. is neutral on the underlying security
D. wants to produce ordinary income - ANSWER B. is bearish on the underlying security
An investor buys 1 ABC Jan 45 Put @ $3. The investor decides to exercise his option
contract. The holder has the right to:
A. buy stock at $42 per share
B. buy stock at $45 per share
C. sell stock at $ 42 per share
D. sell stock at $ 45 per share - ANSWER D. sell stock at $ 45 per share
An investor writes 1 ABC Jan 45 Put @ $ 3. The contract subsequently is exercised. The
writer is obligated to:
A. buy stock at $ 42 per share
B. buy stock at $ 45 per share
C. sell stock at $ 42 per share
D. sell stock at $45 per share - ANSWER B. buy stock at $45 per share
, A customer would sell put contracts because the customer:
A. is bullish on the underlying security
B. is bearish on the underlying security
C. wishes to generate ordinary income
D. wishes to defer taxation of gains on the underlying stock - ANSWER A. is bullish on
the underlying security
The premium on a call or put option is the:
A. exercise price of the contract
B. cost of the contract
C. market price of the underlying instrument
D. cost of the underlying instrument - ANSWER B. cost of the contract
The "cost" of an option contract is the:
A. premium
B. exercise price
C. market price of the underlying security
D. intrinsic value - ANSWER A. premium
The option premium is:
I the price of the contract
II the strike price of the contract
III determined by supply and demand in the marketplace
IV determined by the Options Clearing Corporation
