CPFM Options, Futures, and Derivatives 2

Question 1

A trader buys a call option with a strike price of $50 for a premium of $3. At what stock price does the trader break even at expiration?

Accepted Answer

$53

Answer

$47

Answer

$50

Answer

$56

Question 2

Which Greek measures the rate of change of an option's price with respect to a change in the underlying asset's price?

Accepted Answer

Delta

Answer

Theta

Answer

Vega

Answer

Rho

Question 3

In a futures contract, the daily process of crediting and debiting accounts based on price changes is called:

Accepted Answer

Marking to market

Answer

Settlement risk

Answer

Contango

Answer

Backwardation

Question 4

A put option gives the holder the right to:

Accepted Answer

Sell the underlying at the strike

Answer

Buy the underlying at the strike

Answer

Receive dividends

Answer

Convert the option to stock automatically

Question 5

When the futures price is higher than the expected future spot price and rises with maturity, the market is in:

Accepted Answer

Contango

Answer

Backwardation

Answer

Normal inversion

Answer

Convergence

Question 6

An interest rate swap most commonly exchanges:

Accepted Answer

A fixed rate for a floating rate

Answer

Two fixed-rate cash flows

Answer

Equity returns for bonds

Answer

Currencies at spot

Question 7

Which factor does NOT increase the value of a call option under the Black-Scholes model?

Accepted Answer

Higher strike price

Answer

Higher volatility

Answer

Longer time to expiration

Answer

Higher underlying price