Upgrade to remove ads
Terms in this set (15)
A call's intrinsic value
1. determines its minimum price
2. rises as the price of the stock rises
A naked call option writer
1. profits if stock prices fall
2. does not own the underlying stock
If the stock market declines
1. the owner of a stock index call option loses
2. the writer of a stock index call option profits
Which of the following is similar to a short position in a stock?
buying a put option
The volatility index (VIX)
is derived from put and call index options
The time premium tends to reduce the potential leverage an option offers.
Put and call options are bought and sold (i.e., are traded) in secondary markets.
When speculators invest in commodity futures, they
either enter contracts to make or accept future delivery
Small margin requirements for futures contracts implies
1. the potential profit is magnified
2. the potential loss is magnified
3. the speculator's risk exposure is increased
If a lender agrees to lend a firm $1,000,000 after six months at the going rate, that individual can hedge against the loss from a decline in interest rates by
buying a financial futures contract
If the futures price falls,
1. the short position sustains a profit
2. the long position sustains a loss
Which of the following statements are true concerning stock index futures?
1. Stock index futures may be used to hedge against stock prices rising.
2. Stock index futures are settled in cash and not in delivery
If the futures price of a commodity rises,
1. the long position experiences a profit
2. the short position sustains a loss
A grower of corn enters a contract to make future delivery of corn to reduce the risk of loss from price fluctuations.
A swap agreement transfers ownership in a stock from the seller to the buyer.
Sets with similar terms
Basic Options Transactions
Investment Questions Quiz 2
2.4 Derivative Securities
Series 7: Customer Accounts- Margin on Options
Other sets by this creator
Global Merch Final
Other Quizlet sets
Bio Lecture 03/15/2016
Food Science Midterm I - Readings
Computer Apps Semester 1 Exam (2)