Prior to expiration, an American put option on a stock:
A. is bounded by S-X/(1 +RFR)T
B. will sell for its intrinsic value.
C. will never sell for less than its intrinsic value.
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Which of the following statements regarding the mark to market of a futures account is FALSE Marking to market of a futures account:
A. may result in a margin balance above the initial margin amount and may be done more often than daily.
B. is only done when the settlement price is below the maintenance price.
C. effectively adjusts the price of the future to the new equilibrium level.
Which of the following combinations of options and underlying investments have similarly shaped profit/loss diagrams
A. Long call option/short put option and long stock position.
B. Covered call and short stock/long call.
C. Short put option/long call option and protective put.
Prior to expiration, the maximum value of an Americana call option and an American put option, respectively, is closest to the: American put option American call option ①A. Exercise price Exercise price ②B. Exercise price Underlying price ③C. Underlying price Exercise price
A. ①
B. ②
C. ③
Option investor D sells (writes, takes a SHORT position in) one of the following call options: Type of option: call option Underlying asset: 100 shares of Disney stock Exercise price: $40 per share Premium : $2.25 per share Expiration date : January The current market price of Disney stock is $39.02 per share. Investor D already owns 500 shares of Disney stock. Which of the following describes the amount of initial margin required for this transaction
A. Since the call option is "in the money" investor D is not required to deposit initial margin.
B. Since investor D owns at least 100 shares of Disney stock, he must deposit initial margin in the amount of 100% of the option premium.
C. Since investor D owns at least 100 shares of Disney stock, no additional margin is required.