Reference no: EM13517032
Multiple Choice
1. Jones and Smith each own 100 shares of ZYX stock (currently selling for $60). Jones writes a MAY 65 call, while Smith writes a MAY 70 call. These are the only ZYX option positions the two people have. Which of the following statements is most correct?
a.Jones has a higher position delta in ZYX.
b.Smith has a higher position delta in ZYX.
c.Jones and Smith have the same position delta in ZYX.
d.You cannot determine which person has the highest position delta in ZYX without more information about ZYX stock.
2.Jones and Smith each own 100 shares of ZYX stock (currently selling for $60). Jones writes a MAY 65 call, while Smith writes a MAY 70 put. These are the only ZYX option positions the two people have. Which of the following statements is most correct?
a.Jones has a higher position delta in ZYX.
b.Smith has a higher position delta in ZYX.
c.Jones and Smith have the same position delta in ZYX.
d.You cannot determine which person has the highest position delta in ZYX without more information about ZYX stock.
3.Jones and Smith each own 100 shares of ZYX stock (currently selling for $60). Jones writes a MAY 65 put, while Smith writes a MAY 70 put. These are the only ZYX option positions the two people have. Which of the following statements is most correct?
a.Jones has a higher position delta in ZYX.
b.Smith has a higher position delta in ZYX.
c.Jones and Smith have the same position delta in ZYX.
d.You cannot determine which person has the highest position delta in ZYX without more information about ZYX stock.
4.Which of the following statements is true?
a.Theta is positive for all option positions.
b.Gamma is always opposite in sign to theta.
c.Delta is positive for all call option positions.
d.Common stock has a delta of zero.
5.The biggest single disadvantage of writing puts is
a.positive gamma.
b.the risk of a stable market.
c.high transaction costs.
d.the risk of a falling market.
6.Which of the following probably has the lowest delta?
a.write in-the-money calls
b.write puts
c.buy calls and write calls with a higher striking price
d.buy out-of-the-money puts and write puts with a higher striking price
7.Which of the following statements is true?
a.Stock has a positive gamma.
b.Time value can only increase.
c.The delta of an in-the-money call increases with time.
d. Stock has a negative theta.
8.Which of the following strategies probably has the highest delta?
a.Buy a call, write a call with a higher striking price.
b.Buy a call, write a put.
c.Write a call, write a put.
d.Write a call, buy a put.
9.A person expects the market to decline sharply in the near future. This person wants
a.positive delta, positive gamma.
b.positive delta, negative gamma.
c.negative delta, positive gamma.
d.negative delta, negative gamma.
10.Which of the following conceivably could be a delta neutral position?
a.long APR 40 calls
b.long APR 40 calls, long MAY 45 calls
c.long APR 40 calls, short MAY 45 puts
d.long APR 40 calls, short MAY 45 calls
11.Which of the following statements is true regarding an in-the-money call option, everything else being equal?
a.As time passes its delta will approach one.
b.As time passes its value will approach zero.
c.As time passes its theta will remain constant.
d.As time passes its intrinsic value will decline.
12.Delta is the
a.theoretical value of an option.
b.expected change in the option value as the underlying asset price changes.
c.intrinsic value of the option.
d.influence of dividends on the option value
13. Delta enables the portfolio manager to determine
a.the number of options necessary to mimic the returns of the underlying security.
b.the number of options necessary to reduce the risk of the underlying portfolio by half.
c.the number of options necessary to double the portfolio return per unit of risk
d.the standard deviation of the portfolio returns.
14. For a call option, delta is always
a.greater than one.
b.less than one.
c.less than one and greater than zero.
d.less than or equal to zero.
15. For a call option, delta _____ as the striking price _____.
a.increases, increases
b.decreases, increases
c.increases, approaches the stock price
d.decreases, approaches the stock price
16. For at-the-money European puts and calls on the same stock,
a.the put delta is always less than the call delta.
b.the put delta is always equal to the call delta.
c.the put delta is always greater than the call delta.
d.the put delta is always less than or equal to the call delta.
17.A portfolio contains 10,000 shares of XYZ stock; the portfolio manager writes 10 XYZ calls. If the call delta is 0.455, what is the position delta?
a.455
b.545
c.9,545
d.Cannot be determined
18.A portfolio contains 1,000 shares of XYZ stock; the portfolio manager buys 10 XYZ puts. If the put delta is –0.220, what is the position delta?
a.220
b.780
c.10,220
d.Cannot be determined
19.An ABC JUN 45, European style call has a delta of 0.445; what is the delta of an ABC JUN 45 put?
a.0.445
b.0.555
c.–0.555
d.–0.445
20.All of the following will lower position delta except
a.buying puts
b.buying calls
c.writing calls
d.selling stock