Finance

Writing covered calls protects the writer from any losses if the price of the underlying stock declines.

Writing covered calls protects the writer from any losses if the price of the underlying stock declines.

Writing covered calls protects the writer from any losses if the price of the underlying stock declines.

▸ true

▸ false

apple321   84   1 Reply

okayman

Writing covered calls may result in a profit to the writer even if the stock price does not change.

Writing covered calls may result in a profit to the writer even if the stock price does not change.

Writing covered calls may result in a profit to the writer even if the stock price does not change.

▸ true

▸ false

merrisara   68   1 Reply

silvermoon197

For the writer of in-the-money covered calls , losses on the options contract will be nullified by ...

For the writer of in-the-money covered calls , losses on the options contract will be nullified by ...

For the writer of in-the-money covered calls , losses on the options contract will be nullified by gains on the stock.

▸ true

▸ false

swimchk13   52   1 Reply

shalasha

For a spread to be successful, the difference in strike prices must be greater than the net cost of ...

For a spread to be successful, the difference in strike prices must be greater than the net cost of ...

For a spread to be successful, the difference in strike prices must be greater than the net cost of the purchased option(s).

▸ true

▸ false

cc84sc   56   1 Reply

Hlh13

Covered call writers have unlimited loss exposure as well as unlimited profit potential.

Covered call writers have unlimited loss exposure as well as unlimited profit potential.

Covered call writers have unlimited loss exposure as well as unlimited profit potential.

▸ true

▸ false

tbparker   99   1 Reply

starikovs

The writer of a covered call has taken a(n)

The writer of a covered call has taken a(n)

[html]The writer of a covered call has taken a(n)

▸ conservative investment position with unlimited potential profits.

▸ conservative investment position with limited profits.

▸ aggressive position with limited losses and unlimited potential profi

Jimmyhighroller   80   1 Reply

micp3537

The purchase of a June call with a $25 strike price on XXO stock and the sale of a June call with a ...

The purchase of a June call with a $25 strike price on XXO stock and the sale of a June call with a ...

The purchase of a June call with a $25 strike price on XXO stock and the sale of a June call with a $30 strike price on XXO stock is known as a

▸ long straddle.

▸ short straddle.

▸ vertical spread.

▸ horizontal spread.

cmartinez034   77   1 Reply

realistpnoy

Matt owns 500 shares of IKM stock. The market price of IKM is $51.74. Matt just sold five calls on ...

Matt owns 500 shares of IKM stock. The market price of IKM is $51.74. Matt just sold five calls on ...

[html]Matt owns 500 shares of IKM stock. The market price of IKM is $51.74. Matt just sold five calls on IKM with a strike price of $50. This is known as

▸ writing a naked call.

▸ writing a covered call.

▸ creating a naked cover.

▸ covering a sho

gisellerol   80   1 Reply

bruce2710

Mathew simultaneously sold a July 40 put on ZXY stock for $200 and bought a July 35 put for $75. His ...

Mathew simultaneously sold a July 40 put on ZXY stock for $200 and bought a July 35 put for $75. His ...

Mathew simultaneously sold a July 40 put on ZXY stock for $200 and bought a July 35 put for $75.  His maximum loss is ________ and his maximum gain is ________.

▸ $375; $125

▸ $375; unlimited

▸ $500; $125

▸ $275; $125

simmiie259   63   1 Reply

bruce2710

Mary wrote a 40 call on ABC stock at a price of $275. She does not own any shares of ABC. Mary ...

Mary wrote a 40 call on ABC stock at a price of $275. She does not own any shares of ABC. Mary ...

[html]Mary wrote a 40 call on ABC stock at a price of $275. She does not own any shares of ABC. Mary has

thallium81   52   1 Reply

durandal

Justin owns 400 shares of ORNG stock which he bought 10 months ago at $20 per share and has now ...

Justin owns 400 shares of ORNG stock which he bought 10 months ago at $20 per share and has now ...

[html]Justin owns 400 shares of ORNG stock which he bought 10 months ago at $20 per share and has now risen to $35 per share.  He is afraid the stock price will fall before he has owned it for a full year, but wants to postpone realizing profits on t

berry   57   1 Reply

gamblawc

Bill owns 200 shares of EG stock. In November, the market price of EG was $15.45. Bill sold two ...

Bill owns 200 shares of EG stock. In November, the market price of EG was $15.45. Bill sold two ...

[html]Bill owns 200 shares of EG stock. In November, the market price of EG was $15.45. Bill sold two calls expiring in March with a $16 strike price on EG for $246. From November to March, EG stock price stayed at $15.45.  EG paid a quarterly divide

theferpectstudent   70   1 Reply

careytran

A vertical spread with limited risk might involve

A vertical spread with limited risk might involve

[html]A vertical spread with limited risk might involve

▸ buying a call and a put on the same stock with the same strike price.

▸ buying a put at a lower strike price and a call at a higher strike price.

▸ buying a call at a lower strike price and

linyuki   50   1 Reply

harrison5692

A long straddle

A long straddle

[html]A long straddle

▸ consists of selling and writing an equal number of puts and calls with different strike prices but the same expiration date and the same underlying security.

▸ is a strategy based on the expectation that the price of the und

merrisara   47   1 Reply

kayekalico

Amy owns 100 shares of ABC stock with a cost basis of $35 a share. The stock is currently trading at ...

Amy owns 100 shares of ABC stock with a cost basis of $35 a share. The stock is currently trading at ...

[html]Amy owns 100 shares of ABC stock with a cost basis of $35 a share. The stock is currently trading at $54 a share. Amy believes the price of ABC stock will fall to $45 a share in the near future but over the longer term of 3 to 5 years, increase

karotop02   76   1 Reply

Juke72

The writer of a call option is theoretically exposed to an unlimited loss.

The writer of a call option is theoretically exposed to an unlimited loss.

The writer of a call option is theoretically exposed to an unlimited loss.

▸ true

▸ false

ericayi   51   1 Reply

danterich

The prices of puts and calls on the same stock move independently of one another.

The prices of puts and calls on the same stock move independently of one another.

The prices of puts and calls on the same stock move independently of one another.

▸ true

▸ false

mmaruska   55   1 Reply

k9kulprit

The maximum loss that can be incurred as the buyer of an option is the amount of the option premium.

The maximum loss that can be incurred as the buyer of an option is the amount of the option premium.

The maximum loss that can be incurred as the buyer of an option is the amount of the option premium.

▸ true

▸ false

vikingblood   75   1 Reply

kaitmaw

The maximum amount the buyer of a put can lose is the cost of the option.

The maximum amount the buyer of a put can lose is the cost of the option.

The maximum amount the buyer of a put can lose is the cost of the option.

▸ true

▸ false

Blakksheep33   59   1 Reply

lpants

The longer the time to expiration, the lower the option time premium tends to be.

The longer the time to expiration, the lower the option time premium tends to be.

The longer the time to expiration, the lower the option time premium tends to be.

▸ true

▸ false

fruits   64   1 Reply

iffn23

Paul writes a put with a strike price of $35. The most he could lose by writing the put is $3,500.

Paul writes a put with a strike price of $35. The most he could lose by writing the put is $3,500.

Paul writes a put with a strike price of $35.  The most he could lose by writing the put is $3,500.

▸ true

▸ false

JZ240   52   1 Reply

xxxmedical

Options can provide a lot of price action for a limited dollar investment.

Options can provide a lot of price action for a limited dollar investment.

Options can provide a lot of price action for a limited dollar investment.

▸ true

▸ false

pgakui   45   1 Reply

drdavid

One of the primary advantages of options is the leverage they provide.

One of the primary advantages of options is the leverage they provide.

One of the primary advantages of options is the leverage they provide.

▸ true

▸ false

Ryan37sport   45   1 Reply

sherbiejr16

Once the call premium is recouped, the profit from a call is only limited by the price increases of ...

Once the call premium is recouped, the profit from a call is only limited by the price increases of ...

Once the call premium is recouped, the profit from a call is only limited by the price increases of the underlying stock prior to the contract expiration.

▸ true

▸ false

drw92   50   1 Reply

Cow5215

If a stock price does not rise or fall by the amount of the option premium, the option will not be exercised.

If a stock price does not rise or fall by the amount of the option premium, the option will not be exercised.

If a stock price does not rise or fall by the amount of the option premium, the option will not be exercised.

▸ true

▸ false

bbergeron11   91   1 Reply

egidrarc

An option straddle is the simultaneous purchase (or sale) of both a put and a call option on the ...

An option straddle is the simultaneous purchase (or sale) of both a put and a call option on the ...

An option straddle is the simultaneous purchase (or sale) of both a put and a call option on the same underlying security.

▸ true

▸ false

dex0388   60   1 Reply

rector

A naked option is a conservative investment with limited risk.

A naked option is a conservative investment with limited risk.

A naked option is a conservative investment with limited risk.

▸ true

▸ false

kickykhalil   42   1 Reply

angfucious

Which one of the following actions would be the most appropriate hedge to a short sale of common stock?

Which one of the following actions would be the most appropriate hedge to a short sale of common stock?

Which one of the following actions would be the most appropriate hedge to a short sale of common stock?

▸ sale of a call

▸ purchase of a call

▸ sale of a put

▸ purchase of a put

Godty   60   1 Reply

callisonr

Tiffany would like to own shares of Blackwood, Inc. but only if she can acquire them at a total cost ...

Tiffany would like to own shares of Blackwood, Inc. but only if she can acquire them at a total cost ...

[html]Tiffany would like to own shares of Blackwood, Inc. but only if she can acquire them at a total cost of $30 a share or less. Blackwood is currently trading at $31.76. Cynthia should ________ with a strike price of $30. Ignore transaction costs.

Bootyshaker   51   1 Reply

cryzazn

The price of ABC stock is currently $42 per share, but in six months you expect it to rise to $50. ...

The price of ABC stock is currently $42 per share, but in six months you expect it to rise to $50. ...

[html]The price of ABC stock is currently $42 per share, but in six months you expect it to rise to $50. ABC does not pay a dividend. You buy a six-month call on ABC, with a strike price of $45. The option cost $200. What holding period return do you

trixr4kids   58   1 Reply

alpha987

Steve bought 300 shares of stock at a price of $20 per share. The price of the stock then went up to ...

Steve bought 300 shares of stock at a price of $20 per share. The price of the stock then went up to ...

[html]Steve bought 300 shares of stock at a price of $20 per share. The price of the stock then went up to $33 per share so Steve decided to hedge his position by purchasing 3 puts at a cost of $120 each. The puts have an exercise price of 30. One we

justxdrive   87   1 Reply

melryandion

Shares of Lakewood, Inc. are currently selling for $52.63. You believe the stock will decline in ...

Shares of Lakewood, Inc. are currently selling for $52.63. You believe the stock will decline in ...

[html]Shares of Lakewood, Inc. are currently selling for $52.63. You believe the stock will decline in price ranging from $30 to $32 in the next few months. Which of the following strategies will allow you to profit if your prediction is correct?

funkiiee   62   1 Reply

deathnature9

Roselle paid $250 to buy one put option with a strike price of $35. What is the maximum profit ...

Roselle paid $250 to buy one put option with a strike price of $35. What is the maximum profit ...

Roselle paid $250 to buy one put option with a strike price of $35. What is the maximum profit Roselle can earn on her option contract?

▸ $100

▸ $350

▸ $3,250

▸ Her profit potential is unlimited.

SeaBass2013   54   1 Reply

cglotfelty

Kyle believes the price of Ajax stock is about to decrease. If he wants to profit from the decline ...

Kyle believes the price of Ajax stock is about to decrease. If he wants to profit from the decline ...

Kyle believes the price of Ajax stock is about to decrease. If he wants to profit from the decline in price, he should ________ on Ajax stock.

▸ buy a call

▸ write a put

▸ buy a put

▸ sell a put

edehghany   59   1 Reply

allegri87

In nearly all cases, the purpose of a hedge is to

In nearly all cases, the purpose of a hedge is to

[html]In nearly all cases, the purpose of a hedge is to

▸ reduce or eliminate risk.

▸ make a very high profit in an extremely short time frame.

▸ speculate on a downward drop in a general market index.

▸ speculate on an upward movement in a given

alireads   47   1 Reply

paris.chen

In January, JB stock was selling for $50 per share. When the calls and the puts with a strike price ...

In January, JB stock was selling for $50 per share. When the calls and the puts with a strike price ...

[html]In January, JB stock was selling for $50 per share.  When the calls and the puts with a strike price of $45 expired on March 20, JB was selling at $46.  Which investors made a profit?

lcard044   65   1 Reply

bruce2710

Fred bought 600 shares of Edgewood stock at a price of $19. The stock is currently selling for $53 a ...

Fred bought 600 shares of Edgewood stock at a price of $19. The stock is currently selling for $53 a ...

[html]Fred bought 600 shares of Edgewood stock at a price of $19. The stock is currently selling for $53 a share. To protect his profits, Fred should buy

▸ 600 call options with a strike price of $55.

▸ 600 put options with a strike price of $50.

ssi15   67   1 Reply

lingo94

Allison bought 100 shares of MIKO, Inc. stock at a price of $35 a share. In addition, she bought a ...

Allison bought 100 shares of MIKO, Inc. stock at a price of $35 a share. In addition, she bought a ...

[html]Allison bought 100 shares of MIKO, Inc. stock at a price of $35 a share. In addition, she bought a put with a $35 strike price on MIKO at a cost of $125. Which of the following are true about Allison's position from now until the option expirat

mombefor78   66   1 Reply

sharonfaith31

What is the difference between writing a naked call option and writing a covered call option? Which ...

What is the difference between writing a naked call option and writing a covered call option? Which ...

What is the difference between writing a naked call option and writing a covered call option? Which one is riskier and why?

drew911811   72   1 Reply

amie

Alan just bought 100 shares of Global, Inc. (GLO) at $45 per share and as protection he also bought ...

Alan just bought 100 shares of Global, Inc. (GLO) at $45 per share and as protection he also bought ...

[html]Alan just bought 100 shares of Global, Inc. (GLO) at $45 per share and as protection he also bought a three-month put with a $45 strike price at a cost of $400. One of two scenarios is expected to occur in the next three months: (a) GLO stock d

Godty   74   1 Reply

rick32