Question

If you __________, then you have the right to sell the underlying stock.

1. Buy a Call Option
2. Buy a Put Option
3. Sell a Call Option
4. Sell a Put Option

The _________ takes the opposite side of all exchange traded options as a means of reducing default risk.

1. Securities and Exchange Commission
2. Chicago Board of Option Exchange
3. Federal Reserve Board
4. Options Clearing Corporation

Lower risk free rates lead to _________ call premiums and _________ put premiums.

1. higher; higher
2. higher; lower
3. lower; higher
4. lower; lower

Answer 1

1)correct option is "B"- Buy a Put Option

Put option is right to sell if price goes favorable (that is exercise price is more than future spot price)

2) correct option is "D"- Options Clearing Corporation

option clearing corporation is a largest equity derivative clearing organization and the foundation for secure markets .

such organization takes opposite position (that of buyer )so as to provide clearing and settlement service without any default.

3)

Lower risk free rates lead to lower call premiums and Higher put premiums

correct option is "C"