The maximum loss on a put purchase is the premium on the put. True False 1 point

Question

The maximum loss on a put purchase is the premium on the put. True False 1 points QUESTION 2 Buying a call option is the mirror image of selling a put option. True False 1 points QUESTION 3 Buying a call with a higher exercise price offers a greater profit potential than one with a lower exercise price. True False 1 points QUESTION 4 Given two bearish investors, the more risk averse investor would tend to select a put with a higher exercise price. True False 1 points QUESTION 5 Buying a put money spread is a bearish strategy. True False 1 points QUESTION 6 In a calendar spread the time value of the nearby option will decay more rapidly. True False 1 points QUESTION 7 A call butterfly spread combines a call bull spread with a call bear spread. True False 1 points QUESTION 8 A call butterfly spread is a bullish strategy that is profitable if stock prices decrease. True False 1 points QUESTION 9 The holder of a straddle does not care which way the market moves as long as it makes a significant move. True False 1 points QUESTION 10 An investor who holds a strap believes the market is more likely to go up than down. True False 1 points QUESTION 11 Credit risk is handled in futures markets by daily marking-to-market. True False 1 points QUESTION 12 Stock index futures contracts are terminated by delivering the portfolio of stocks represented by the index. True False 1 points QUESTION 13 Very few futures contracts are terminated in delivery of the underlying commodity or security. True False 1 points QUESTION 14 Historically, most of the forward and futures contracts were made on commodities until the 1970s. However, these days the majority of futures contracts are financial futures. True False 1 points QUESTION 15 Speculators in the futures market play an important role by providing the liquidity that makes hedging possible and assuming the risk that hedgers are trying to eliminate. True False 1 points QUESTION 16 When futures accounts are marked-to-market, an account balance below the maintenance margin must be brought up to the maintenance margin. True False 1 points QUESTION 17 If volume and open interest increase with prices, it is considered a sign of a solid bull market. True False 1 points QUESTION 18 The dividends that are subtracted from the cost of storage to determine the cost of carry are actually the present value of future dividends. True False 1 points QUESTION 19 A convenience yield is an explanation for a negative cost of carry. True False 1 points QUESTION 20 Holding everything else constant, dividends or interest on the underlying commodity would make a futures price be higher. True False

Explanation / Answer

1) True

2) True

3) False

4) True

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