Question

Question 45

The sale of a put option would be considered to be fully covered when:

• The account is long 100 shares of the underlying stock
• Cash equal to the exercise price is deposited in the account
• A put with a higher exercise price is long in the account
• The account is also short 100 shares of the underlying stock
• more than one of the above is correct

Question 6

A customer buys 1 XYZ Jan 65 put at 3.50 when XYZ is trading at 63.10. Just prior to expiration, with the option trading at 6.65 bid-6.70 asked, the customer closes his position with a market order. The gain is _______?

• $190
• $315
• $320
• $350

Question 7

If a NOV 115 call option with 14 days to expiration is priced at $1.50 when the underlying stock price is $113.25 and the risk free rate is 7.5%, what is the lower bound value of this call option?

• 0
• 1.75
• 3.43
• 1.43

Answer 1

question 45

answer : more than one of the above is correct

correct options

• A put with a higher exercise price is long in the account
• The account is also short 100 shares of the underlying stock.

question 6

answer ;

given, A customer buys 1 XYZ Jan 65 put at 3.50

Bid price = $6.65 Asked price = $6.70

total amount = 3.50*100 = $350

if he sell the contract at bid price,

amount received by selling the contract = 100*6.65 = $665

gain = selling price - purchase price = 665 - 350 = $315

Gain = $315

Question 7

answer : given

  underlying stock price is $113.25

  risk free rate is 7.5%

  NOV 115 call option with 14 days to expiration is priced at $1.50

we know that,

lower bound value of the call option = MAX(0,S-X/(1+r)^t

= MAX(0,113.25-115/(1+7.5%)^(14/365))

   = 0.0

lower bound value of the call option = 0