SIE EXAM - OPTIONS QUESTIONS AND ANSWERS
100% CORRECT
An investor buys 1 ABC Jan 45 Call @ $3. The investor then exercises his option
contract. With this, the holder has the right to:
A. buy stock at $45 per share
B. buy stock at $48 per share
C. sell stock at $45 per share
D. sell stock at $48 per share - ANSWER A. buy stock at $45 per share
If the writer of an equity call contract is exercised, the writer must deliver: - ANSWER D.
stock in 2 business days
A customer would buy put contracts because the customer: - ANSWER B. is bearish on
the underlying security
If the writer of an equity put 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 day - ANSWER C. cash in 2 business days
The writer of a put on a listed stock is exercised. Upon assignment, the writer must:
A. pay the premium
, B. deliver cash
C. buy stock
D. sell stock - ANSWER C. buy stock
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
ABC Jan 50 call contracts are trading in the market at .65. What is the dollar price that a
customer would pay for 2 contracts at this price? - ANSWER $130.00
An option contract has intrinsic value if exercise is profitable to the: - ANSWER holder,
ignoring the premium paid
Which of the following contracts has the greatest intrinsic value?
A. ABC Jan 50 Call when market price of ABC stock is $ 55
B. ABC Jan 50 Call when market price of ABC stock is $ 50
C. ABC Jan 50 Put when market price of ABC stock is $ 40
D. ABC Jan 50 Put when the market price of ABC stock is $ 60 - ANSWER C. ABC Jan 50
Put when the market price of ABC stock is $ 40
A client buys an ABC Jul 50 Call @$2 when the stock is trading at $ 55. The contract: -
ANSWER has 5 points of intrinsic value
If the market price is above the strike price on a put contract, the difference is termed
, the: - ANSWER out the money amount
Which of the following contracts is "out the money" by the greatest amount?
A. ABC Jan 50 Call when the market price of ABC stock is 55
B. ABC Jan 50 Call when the market price of ABC stock is 50
C. ABC Jan 50 Put when the market price of ABC is 40
D. ABC Jan 50 Put when the market price of ABC is 60 - ANSWER D. ABC Jan 50 Put
when the market price of ABC is 60
Which statement is TRUE about option contracts? - ANSWER Puts go "out the money"
when the market price rises above the strike price
Compared to buying the underlying stock the chief plus of buying a call option is: -
ANSWER lower capital requirement
A customer is short an ABC Jan 60 Call. A profit is showing in the position that the
customer wants to capture. The appropriate order to enter is a(n): - ANSWER closing
purchase
A customer is long an ABC Jan 60 Put. The position has a profit that the customer
wishes to capture. The proper order to enter is a(n): - ANSWER closing sale
A customer is short an ABC Jan 60 Put. The position has a profit that the customer
wishes to capture. The proper order to enter is a(n): - ANSWER closing purchase
A customer is long an ABC Jan 60 Call. The position has profit and the customer wants
to capture it. The proper order to enter is a(n): - ANSWER closing sale
Which options strategy has the greatest possible profit in a Bull market? - ANSWER
Long Call
100% CORRECT
An investor buys 1 ABC Jan 45 Call @ $3. The investor then exercises his option
contract. With this, the holder has the right to:
A. buy stock at $45 per share
B. buy stock at $48 per share
C. sell stock at $45 per share
D. sell stock at $48 per share - ANSWER A. buy stock at $45 per share
If the writer of an equity call contract is exercised, the writer must deliver: - ANSWER D.
stock in 2 business days
A customer would buy put contracts because the customer: - ANSWER B. is bearish on
the underlying security
If the writer of an equity put 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 day - ANSWER C. cash in 2 business days
The writer of a put on a listed stock is exercised. Upon assignment, the writer must:
A. pay the premium
, B. deliver cash
C. buy stock
D. sell stock - ANSWER C. buy stock
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
ABC Jan 50 call contracts are trading in the market at .65. What is the dollar price that a
customer would pay for 2 contracts at this price? - ANSWER $130.00
An option contract has intrinsic value if exercise is profitable to the: - ANSWER holder,
ignoring the premium paid
Which of the following contracts has the greatest intrinsic value?
A. ABC Jan 50 Call when market price of ABC stock is $ 55
B. ABC Jan 50 Call when market price of ABC stock is $ 50
C. ABC Jan 50 Put when market price of ABC stock is $ 40
D. ABC Jan 50 Put when the market price of ABC stock is $ 60 - ANSWER C. ABC Jan 50
Put when the market price of ABC stock is $ 40
A client buys an ABC Jul 50 Call @$2 when the stock is trading at $ 55. The contract: -
ANSWER has 5 points of intrinsic value
If the market price is above the strike price on a put contract, the difference is termed
, the: - ANSWER out the money amount
Which of the following contracts is "out the money" by the greatest amount?
A. ABC Jan 50 Call when the market price of ABC stock is 55
B. ABC Jan 50 Call when the market price of ABC stock is 50
C. ABC Jan 50 Put when the market price of ABC is 40
D. ABC Jan 50 Put when the market price of ABC is 60 - ANSWER D. ABC Jan 50 Put
when the market price of ABC is 60
Which statement is TRUE about option contracts? - ANSWER Puts go "out the money"
when the market price rises above the strike price
Compared to buying the underlying stock the chief plus of buying a call option is: -
ANSWER lower capital requirement
A customer is short an ABC Jan 60 Call. A profit is showing in the position that the
customer wants to capture. The appropriate order to enter is a(n): - ANSWER closing
purchase
A customer is long an ABC Jan 60 Put. The position has a profit that the customer
wishes to capture. The proper order to enter is a(n): - ANSWER closing sale
A customer is short an ABC Jan 60 Put. The position has a profit that the customer
wishes to capture. The proper order to enter is a(n): - ANSWER closing purchase
A customer is long an ABC Jan 60 Call. The position has profit and the customer wants
to capture it. The proper order to enter is a(n): - ANSWER closing sale
Which options strategy has the greatest possible profit in a Bull market? - ANSWER
Long Call
