One of the advantages of forward markets is

One of the advantages of forward markets is

a. performance is guaranteed by the G-30
b. trading is conducted in the evening over computers
c. the contracts are private and customized
d. trading is less costly and governed by more rules
e. none of the above






Answer: C

"Wal-Mart calls" are an example of

"Wal-Mart calls" are an example of 

a. an option series
b. an option class
c. an option grade
d. a and b
e. none of the above




Answer: E

Option traders incur which of the following types of costs?

Option traders incur which of the following types of costs?

a. margin requirements
b. taxes
c. stock trading commissions
d. a and b
e. a, b and c

Answer: E

What amount must a call writer pay if a cash-settled index call is exercised?

What amount must a call writer pay if a cash-settled index call is exercised?

a. difference between the index level and the exercise price
b. exercise price
c. difference between the exercise price and the index level
d. index level
e. none of the above




Answer: C

An order that specifies a maximum price to pay if buying is a

An order that specifies a maximum price to pay if buying is a

a. stop order
b. market order
c. limit order
d. all or none order





Answer: D

Who determines whether options on a company's stock will be listed?

Who determines whether options on a company's stock will be listed?

a. the clearing house
b. Securities Exchange Commission
c. the company
d. the exchange
e. none of the above

Answer: D

In which city did organized option markets originate?

In which city did organized option markets originate?

a. New York
b. Chicago
c. Philadelphia
d. San Francisco
e. none of the above





Answer: B

Which of the following index options is the most widely traded?

Which of the following index options is the most widely traded?

a. S&P 500
b. Nikkei 225
c. Technology Index
d. New York Stock Exchange Index
e. none of the above

Answer: D

All of the following are forms of options except

All of the following are forms of options except

a. convertible bonds
b. callable bonds
c. warrants
d. mutual funds
e. none of the above





Answer: D

A writer selected to exercise an option is said to be

A writer selected to exercise an option is said to be

a. marginal
b. assigned
c. restricted
d. designated
e. none of the above

Answer: B

The exchange with the largest share of the options market is the

The exchange with the largest share of the options market is the

a. American Stock Exchange
b. Boston Options Exchange
c. Chicago Board Options Exchange
d. Pacific Stock Exchange
e. Philadelphia Stock Exchange





Answer: C

Which of the following are long-term options?

Which of the following are long-term options?

a. Bond options
b. LEAPS
c. currency options
d. Nikkei put warrants
e. none of the above





Answer: B

An investor who exercises a call option on an index must

An investor who exercises a call option on an index must

a. accept the cash difference between the index and the exercise price
b. purchase all of the stocks in the index in their appropriate proportions from the writer
c. immediately buy a put option to offset the call option
d. immediately write another call option to offset
e. none of the above

Answer: D

Index options trading on organized exchanges expire according to which of the following cycles?

Index options trading on organized exchanges expire according to which of the following cycles?

a. March, June, September, and December
b. each of the next four consecutive months
c. the current month, the next month, and the next two months in one of the other cycles
d. every other month for each of the next nine months
e. none of the above





Answer: C

The option price is also referred to as the

The option price is also referred to as the

a. strike
b. spread
c. premium
d. fee
e. none of the above

Answer: C

Which type of trader legitimately practices dual trading?

Which type of trader legitimately practices dual trading?

a. floor brokers
b. off-floor option traders
c. board brokers
d. designated primary market makers
e. none of the above





Answer: D

An investor who owns a call option can close out the position by any of the following types of transactions except

An investor who owns a call option can close out the position by any of the following types of transactions except

a. exercise
b. offset
c. expiring out-of-the-money
d. buying a put
e. none of the above




Answer: D

The exercise price can be set at any desired level on each of the following types of options except

The exercise price can be set at any desired level on each of the following types of options except

a. FLEX options
b. equity options
c. over-the-counter options
d. all of the above
e. none of the above

Answer: A

Which of the following is a legitimate type of option order on the exchange?

Which of the following is a legitimate type of option order on the exchange?

a. purchase order
b. limit order
c. execution order
d. floor order
e. all of the above




Answer: B

If the market maker will buy at 4 and sell at 4.50, the bid-ask spread is

If the market maker will buy at 4 and sell at 4.50, the bid-ask spread is

a. 8.50
b. 4.25
c. 0.50
d. 4.00
e. none of the above

Answer: C