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Commodities, Futures and Options Practice Exam

courtney.olive1 10 questions

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Questions in this quiz (10)

  1. 1An option is a legally binding contract that gives the buyer the right, but not the obligation to buy or sell a futures contract at a specified price (strike price or exercise price) on or before the expiration date of the option. Is this definition of an option TRUE or FALSE
    1. ATrue
    2. BFalse
  2. 2Choose the correct possibilities below to complete this sentence: buyers of call options anticipate the value of the underlying future contract will ________ and the sellers of put options anticipate the value of the underlying futures contract will _________.
    1. ADecrease: remain neutral or decrease
    2. BDecrease: remain neutral or increase
    3. CIncrease: remain neutral or decrease
    4. DIncrease: remain neutral or increase
  3. 3Choose the correct possibility below to complete this sentence: the price of an option is called the ______ and it is quoted in either dollars per units or points.
    1. AOption Cost
    2. BIntrinsic value
    3. CPremium
    4. DExercise value
    5. EStrike price
  4. 4Choose from the possibilities below to complete these statements correctly: a __________ has the right but is not obligated to SELL the underlying futures contract and is not subject to margin. A __________ is obligated to SELL the underlying futures contract if it is exercised and is subjected to margin.
    1. ACall option buyer, call option seller
    2. BCall option seller, call option buyer
    3. CPut option buyer, put option seller
    4. DPut option seller, put option buyer
    5. EPut option buyer, call option seller
  5. 5Which of the following statements correctly describe options:
    1. The profit potential for the purchase of a call option is unlimited
    2. The maximum loss when long a put option is limited
    3. A short put position is margined
    4. A long call position is margined
    5. The sale or writing of a put option is when you anticipate a neutral or bullish view of the market.
    1. A1, 2 and 4
    2. B1, 2, 3 and 4
    3. C1,2, 3 and 5
    4. D1, 2, 4 and 5
    5. EAll of the above
  6. 6An option premium has two components, which are known as the exercise price and breakeven point. Is this TRUE or FALSE?
    1. ATrue
    2. BFalse
  7. 7What is the intrinsic value and the time value of the call if the underlying futures contract is trading at $50 and the call option, which has a strike/exercise price of $45, is trading at $4.00?
    1. AIntrinsic value = 1; time value = 5
    2. BIntrinsic value = 5; time value = 1
    3. CIntrinsic value = 46; time value 4
    4. DIntrinsic value = 43; time value = 5
    5. EIntrinsic value = 2; time value = 3
  8. 8Choose the correct response to the following situation: the underlying futures contract is trading at $95. The call option with a strike/exercise price is $90 is trading at $4. The option is ____________.
    1. AIn-the-money by $5
    2. BIn-the-money by $4
    3. CIn-the-money by $1
    4. DOut-of-the-money by $5
    5. EOut-of-the-money by $4
  9. 9Which of the following are TRUE about hedging with options:
    1. Option buyers protect themselves against unfavourable price moves
    2. Option buyers can still benefit from a favourable price move
    3. There is no margin requirement
    4. Call options are used to establish a maximum price - a strategy a consumer might initiate
    5. Put options are used to establish a minimum price - a strategy a producer might initiate
    1. A1 and 2
    2. B1, 2 and 3
    3. C1, 2, 3 and 4
    4. D1, 2, 3 and 5
    5. EAll of the above
  10. 10Under what circumstances can the writer of a put option on a futures contract expect to profit?
    1. AThe underlying futures contract price premium
    2. BThe underlying futures contract remain the same
    3. CThe decrease in the underlying futures contract is less than the premium received
    4. DAll of the above
    5. ENone of the above

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Description
3 Commodities, Futures and Options Quiz on Commodities, Futures and Options Practice Exam, created by courtney.olive1 on 25/04/2016.
Language
English
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commodities, futures and options3
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