A put option with a strike price less than the current spot price is said to be a) in-the-money b) out-of-the-money c) at-the-money d) profitable e) none of the above

Q: In an option the "strike" price and "exercise" price have two completely different meanings.

A: The answer and the explanation is provided below:

Q: The majority of the time, once a put option is purchased it is either sold for a gain or expires…

A: Options are derivative instruments in which the buyer of the option has the right or obligation to…

Q: If you have long position in one asset and you want to hedge the risk of price drop in that asset…

A: With the help of a hedging strategy, the investor generally reduces or set off the risk while…

Q: Which of the following is True? a. Call option and Put option are identical derivatives contracts…

A: If the buyer of a short call option exercises the right to buy the underlying asset from the seller…

Q: Can you please help with the question in the picture attached? The answer should be only one and I’m…

A: Understanding At-the-Money (ATM) Options:An option is at-the-money if the underlying asset's current…

Q: t expiration, the time value of an at the money call option is always Select one: a. positive. b.…

A: Value of option is made up of two constituents - Intrinsic value and time value.

Q: Question E denotes the strike or exercise price below. For an American call option, A and B in the…

A: The intrinsic value of the option refers to the difference between the current market price and the…

Q: Time value of American option represents the value of keeping option alive and waiting till a later…

A: Solution: Option premium comprises or two values: Intrinsic value and Time value.

Q: MCQ: The type of option that gives the right to buyer to sell the underlying option at spe price is…

A: A put option is an instrument which provides its holder an option to sell an underlying asset on a…

Q: Compared to short hedging, the advantage to using a put option is: A. Put options involve a…

A: A put option is a contract giving the owner the right, but not the obligation, to sell the…

Q: ue/ False There is a possibility of unlimited loss to put option buye

A: A put option is an instrument which provides its holder an option to sell an underlying asset on a…

Q: which one is true? for any type of option strategy, the payoffs will never be negative  for any type…

A: Option C is true.

Q: What is the value of a call option or a put option if the stock price is zero? What if the stock…

A: The value of a call option or a put option is directly linked to the underlying asset's price, which…

Q: Explain why speculating in derivatives, futures contracts and options is not appropriate for the…

A: Speculation regulates the international financial system. Future action in stock market is dependent…

Q: theorem claims that which of the following factors influence options prices n a predictable way: a)…

A: Call option and put option give you opportunity to sell or buy stock on expiration of period by…

Q: If a call option has a strike price of $.45 and premium cost of $.03, and at the time of the…

A: Call Option: When a call option is exercised, it commits both the buyer and the seller to purchase a…

Q: a) How can you create a bear spread using call options? How can you create a bear spread using put…

A: Options trading involves various strategies that traders can use to speculate on market movements or…

Q: European put-call parity says the difference in price for a call and a put option, both with…

A: European put-call parity is a principle in options pricing that relates the prices of European call…

Q: Analyze the value of a call option if the stock price is zero? What if the stock price is extremely…

A: Call options are financial contracts that allow the option buyer the right, but not the duty, to…

Q: 2) Which of the following statements is FALSE? A) The option buyer, also called the option holder,…

A: Option is a derivative contract which allows the buyer of the option a right to buy or sell the…

Q: A call option's premium minus its intrinsic value is known as its: Choose the right anwer a. No…

A: Call options refers to the option contract where contract holder obtain a right to buy underlying…

Q: True or False

A: The objective of the question is to determine whether a European call option with a longer…

Q: the higher the strike price the intrinsic value of a put option and the the the premium you are…

A: Correct answer is (d) higher, higher

Q: To hedge, a user of an energy resource wants price protection from rising prices. The user decides…

A: Options are the derivative instrument that can be used by the investors to hedge their risk of loss.…

Q: Under the assumptions of the Black-Scholes model, which value does not affect the price of a…

A: Black-Scholes model is a model that is used to find the price of the European options only.

Q: What does the option contract payoff diagram look like for NeedOil. Co. if it chooses to buy a call…

A: Options are the derivative contracts, there is not limit in the upside value of an option, however…

Q: Compared to long hedging, the advantage to using a call option is: A. Call options involve a…

A: Call option contract gives the contract holder a right to purchase shares or stocks at some future…

Q: The majority of the time, once a call option is purchased it is either sold for a gain or expires…

A: Call option holder has a right to buy a particular stock at expiry date at a strike price or lapse…

Q: For each of the statements below, determine if they are TRUE/FALSE and briefly explain why. a)…

A: The hedging Delta is about adjusting the delta of portfolio for the reduction for for the…

Q: A call option that is Multiple Choice in the money out of the money has a positive intrinsic value…

A: 1)In-the-money call option (ITM):The underlying asset may be purchased with a call option at a…

Q: If the underling is a liability rather than an asset, then the strike price of the option should be…

A: The option is a financial security since a buyer can purchase the right rather than the obligation…

Q: Tick all those statements on options that are correct (and don't tick those statements that are…

A: Two categories of financial derivatives are call and put options, which provide the holder the…

Q: It's acceptable to use the Black-Scholes formula or binomial trees to value real options,even though…

A: Black Scholes and binomial models are the valuation models to value an option.

Q: The pay off from an option depends on the market price of the underlying asset a) a put holder…

A: The put option is a financial derivative instrument which derives its value from the underlying. A…

Q: The forex spot market is an over - the - counter market Select one : True or False

A: Stock market is a public market which exist for buying, selling and issuing stocks that traded on…

Q: (b) What is the time value of an option? Why does an option's time value decay as the option…

A: Time value represents the portion of an option premium related to the time remaining until the…

Q: Which of the following statements about the value of a call option at expiration is FALSE? A: The…

A: A call option is a financial contract that gives the holder the right, but not the obligation, to…

Q: Which of the below statements is false about real options?  A. Real options increase firm value…

A: Real options are also such options which will be providing various types of opportunities for…

Q: The strike price of an option is: Answer a. The market price at the time the option is exercised b.…

A: Option has Strike Price, which is also known as Exercise Price.

Q: Which of the following is/are true about the current market value of a derivative instrument?…

A: Derivative instruments are those instruments which derive their value from an underlying asset like…

Q: in the straddle option what is good to have an options with strike price equal, higher  or less than…

A: Straddle means Either Buying a Call as well as a Put Option or selling the call as well as put…

Q: As a call option is an option to buy and a put option an option to sell, the opposite position to…

A: Options give the buyer the right to purchase the underlying asset but not the obligation to exercise…

Q: Below is a chart with profit/loss on the vertical axis, and the $/£ exchange rate on the horizontal…

A: All of the options are incorrect.