Call Option and Price

Topics: Call option, Option, Put option Pages: 10 (2832 words) Published: November 8, 2012
MIDTERM #1
Student: ___________________________________________________________________________

1.

You purchase one September 50 put contract for a put premium of \$2. What is the maximum profit that you could gain from this strategy? A. \$4,800 B. \$200 C. \$5,000 D. \$5,200 E. None of these is correct The following price quotations on IBM were taken from the Wall Street

2.

Journal. The premium on one IBM February 90 call contract is A. \$4.1250 B. \$418.00 C. \$412.50 D. \$158.00 E. None of these is correct 3. A put on Sanders stock with a strike price of \$35 is priced at \$2 per share, while a call with a strike price of \$35 is priced at \$3.50. The maximum per-share loss to the writer of an uncovered put is __________, and the maximum per-share gain to the writer of an uncovered call is _________. A. \$33; \$3.50 B. \$33; \$31.50 C. \$35; \$3.50 D. \$35; \$35 You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is \$50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes:

4.

To establish a bull money spread with calls, you would _______________. A. buy the 55 call and sell the 45 call B. buy the 45 call and buy the 55 call C. buy the 45 call and sell the 55 call D. sell the 45 call and sell the 55 call

5.

You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is \$50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes:

7.

10. A hedge ratio for a call is always A. equal to one. B. greater than one. C. between zero and one. D. between minus one and zero. E. of no restricted value. 11. A hedge ratio for a put is always A. equal to one. B. greater than one. C. between...