Options: Level 1-2 Challenges


True, False or It depends?

If you own a call option on a stock, your potential profit is unlimited.

FB's current stock price is $75.89. A broker's market for the put option on the $80 strike expiring in 2 days is $3.75 bid at $4.00. Assuming no execution risk, what trade do you want to execute?

Assume that the risk-free interest rate is 0%, FB does not issue dividends, and that there are no transaction costs.

Sally expects that APPL stock will rise from its current price of $129.00 to $135.00 on March 20th. Assuming that her prediction comes true, which of the following option strategies would yield the most profit?

Note: No other corresponding trades are done. In particular, she does not hedge her delta exposure.
Ignore interest rate and transaction costs.
There are no dividends.

Image credit: Thinkorswim

Which option is worth more (more than or equal to)?

A) An American call on the $10 strike that expires in January
B) An European call on the $10 strike that expires in January

True or False?

Assume that the price of a stock is $100.
Because a call has unlimited profit potential, hence there is no upper bound on the price of a call.


Problem Loading...

Note Loading...

Set Loading...