The call is normally a out-of-the-money call

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Reference no: EM131607037

1. The covered call position is a combination of a long stock position and a long call position, and the call is normally a out-of-the-money call." True or false?

2. "According to the modern portfolio theory, if the required rate of return of the underlying asset of a futures contract is lower than the risk-free rate, the current futures price should be higher than the expected spot rate at the maturity of the contract."

3. The time value for a call option is zero if the option is out-of-the-money." True or false?

4. "The idea of the collar position is to use the long call to protect the downside risk of the long stock position and at the same time, use the income from selling the put to reduce the cost of the protection." True or false?

5. "For a long stock position, the potential gain is limited, but the potential loss is unlimited (until the price drops to zero)." True or false?

Reference no: EM131607037

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