SIE Exam Lesson 15 Options pt 5

SIE Exam Lesson 15 Options pt 5

This is a SIE Exam Lesson 15 Options pt 5  options pt.1 which is covering spread options, See how you do if you need help listen to the lesson over.

Questions covered include

1. It is the purchasing and selling of put or call options with different strike prices, different expiration dates, or both.

A. combination

B. spread

C. straddle

D. strangle

2. In a spread, when you close out one position, you are expected to close out the other position at the same time.

A. True

B. False

3. The longer the option, the higher the time value premium.

A. True

B. False

4. As an option approaches its expiration date, the time value on that option reaches its maximum value at the expiration of that option.

A. True

B. False

5. This spread is designed to try to capture the decline of an option’s time value as the option approaches its expiration date.

A. calendar spread

B. long call spread

C. long put spread

D. short call spread

6. Which of the following is bearish?

A. long call spread

B. short call spread

C. short put spread

D. all of the above

7. The maximum profit for a long call spread is the net cost of the spread.

A. True

B. False

8. A short call spread is a credit spread.

A. True

B. False

9. You bought Jan 80 call at $10 and sold Feb 80 call at $20. Stock trades at $100 at expiration. Feb 80 call has $5 time value left. Which is true?

(Note: This transaction is a calendar spread. The expiration mentioned is the expiration of the call option on January.)

A. You shall buy back the February 80 call at $5.

B. You shall buy back the February 80 call at $20.

C. You shall buy back the February 80 call at $25.

D. The February 80 call would expire worthless.

10. You bought Nov 30 call at $3 and sold Dec 30 call at $5. Stock trades at $25 at Nov expiration. Dec 30 call has $1 time value left. Which is true?

(Note: This transaction is a calendar spread.)

A. The November 30 call would expire worthless.

B. The December 30 call would expire worthless.

C. You would have a net profit of $2 by closing your position on the spread.

D. all of the above

11. You bought Mar 60 call at $5 and sold Apr 70 call at $3. This transaction is most probably a ___.

A. long call spread

B. long put spread

C. short call spread

D. short put spread

12. You initiated a long call spread by buying Sept 70 call at $10 and selling Oct 80 call at $5. What is your maximum profit in this transaction?

A. $5

B. $10

C. $15

D. The maximum profit cannot be determined because the stock price is not given.

13. You initiated a long call spread by buying May 100 call at $15 and selling June 85 call at $8. What is your maximum loss in this transaction?

A. $7

B. $8

C. $15

D. $23

14. If you enter into a long call spread, which of the following pair of transactions would give you the greatest possible profit?

A. buying a July 30 call at $5 and selling an August 50 call at $4

B. buying a July 25 call at $6 and selling an August 40 call at $5

C. buying a July 40 call at $9 and selling an August 60 call at $5

D. All of the above transactions have equal maximum profit

15. You initiated a short call spread by buying a Jan 40 call at $4 and selling a Feb 30 call at $7. What is your maximum profit in this transaction?

A. $3

B. $7

C. $11

D. The maximum profit cannot be determined because the stock price is not given.

16. If you enter into a short call spread, which of the following transactions would you pair with buying a Nov 65 call at $6 to have the greatest possible profit?

A. selling a December 60 call at $7 per share

B. selling a December 50 call at $8 per share

C. selling a December 40 call at $9 per share

D. The greatest possible profit would depend upon the highest price that the stock could get.

17. You entered into a long put spread by buying Aug 95 put at $15 and selling Sept 75 put at $9.