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33 Cards in this Set
- Front
- Back
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A futures option is a contract giving the purchaser the right to buy or sell a futures contract at a certain price during a specified time period...(True or False) |
True |
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An international bank wants to hedge its Swiss Franc position. There are 1.5 million Franc in "inventory," and the December futures price is $.9855/SF..... |
Selling 12 December Swiss Franc futures contracts |
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With the cash price of live cattle at 88.00¢.lb., a cow-calf operation owner hedges his 80,000 lb. long cash position by buying 2 October 88 Live Cattle puts for 3.20¢/lb. He later sells the options for 4.95¢/lb., and sells his cattle when the cash price is 86.00¢. Cattle contracts are 40,000 lbs. The net result of the hedge is... |
$200 loss |
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The cash coffee price is 169.80¢/lb. A coffee grower decides to hedge his crop at this level. He buys an at-the-money 170 November coffee put for 3.00¢/lb.... |
169.90¢/lb. |
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Buying a high strike price put and selling a low strike price put is done to take advantage of... |
Declining prices |
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A speculator buys a September T-Bond futures contract at 108-00. The price increases to 111-00. At this time, the speculator writes a March T-Bond 111-00 call for a premium of 1-28. If the March T-Bond call expires and he closes his futures position at 111-00, he has a profit of... |
$4,437.50 |
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If a customer writes a 100 DJ Industrial Avg. call and buys a 104 DJ Industrial Avg. call, he has a... |
Bear call spread |
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A customer buying a 1185 June COMEX gold futures put, selling 2, 1195 June COMEX gold futures puts, and buying a 1205 June COMEX gold futures put when the June gold price is $1194.5/oz. has entered is... |
Butterfly put spread |
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A speculator purchased 4 March Cotton calls at 3.90¢/lb. He offset his calls at 4.50¢/lb., and commissions are $100 one-way per contract. Each cotton futures contract contains 50,000 lbs. of cotton. What was his net gain/loss... |
$100/contract gain |
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Which of the following futures options positions are most closely linked to a short futures hedge... |
Long a put and short a call |
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Which of the following crude oil options transactions is a short straddle... |
Selling a May 7400 call and selling a May 7400 put |
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Your customer buys 2 March 1750 silver calls and sells 2 March 1770 silver calls. He has entered... |
Vertical spreads |
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A manufacturing firm uses copper as a raw material. The firm wished to hedge its raw material inventory, which is large, against declining prices using options. An appropriate transaction is... |
Buying puts |
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You have a customer who anticipates a sharp increase in long-term interest rates. He would like to use T-Bond options to speculate on his forecast. Which of the following positions is likely to produce the largest gain... |
Buying puts |
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Which of the following options hedging strategies provides the best protection against a declining exchange rate for the Japanese Yen... |
Long put |
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In which of the following situations is the purchase of a Eurodollar put option an appropriate hedging strategy... |
A corporation issuing commercial paper to hedge against rising interest rates |
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To construct a strangle sale, you would advise your customer to... |
Sell and out-of-the-money call and an out-of-the-money put |
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The amount by which an option premium could be expected to change for a given price change in the underlying futures can be calculated by using... |
Delta |
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Your customer wants to enter a bull put spread on silver. The September 1770 put is 30.00¢/oz., and the 1790 put is 43.00¢/oz. (5000 oz. per contract). If he enters a spread at these prices, his maximum potential loss is.... |
$340 |
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At CME Group, the exchange minimum margin for writing calls or puts on T-Bond futures is... |
called SPAN, revised at least daily and provided in downloading form to brokerage firms, who run a SPAN back-end program to determine required margin levels |
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Your customer opened at delta neutral position buying 4 Dec. 1100 gold futures puts (delta .70) and selling 7 Dec. 1080 gold futures puts (delta .40). A few days later, the deltas have changed. The 1100 put delta is now .90, and the 1080 put delta is .60. To bring the position back to delta neutral, your customer would... |
Buy 1 Dec. 1080 gold futures put |
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A customer enters the following positions. long 1 Sep. 326 Copper call, short 2 Sep. 330 Copper calls, long 1 Sep. 334 Copper call. His net debit is .55¢/lb. What is his break even price? |
$3.2655 |
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Your customer buys a call butterfly spread utilizing the Sep. Swiss Franc 9800, 9850, and 9900 options. Which of the futures prices below provides the maximum profit in the spread at option expiration? |
.9850 |
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A jeweler expects gold prices to rise before he needs to purchase gold. He purchases a Sep. 1105 Gold call (100 troy oz. per contract) for $3.20, and offsets is at $3.45. What is the result of this transaction? |
A gain of $25 |
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If your customer wanted to protect a short futures position against large losses, you should recommend that she sell a call against the short futures position...(True or False) |
False |
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On Dec. 15 your customer believes the British Pound is headed lower, relative to the dollar... |
A gain of $1,456.25 |
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As a call option approaches expiration, the underlying futures price must increase significantly for the option buyer to earn a profit...(True or False) |
True |
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In January, a precious metals dealer who has just purchased 1,000 troy ounces of gold at $1195.90/oz. decides to sell options on April gold futures... |
$14,100 loss |
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With Sep. T-Note futures at 110-23, the practice of buying one T-Note futures contract and buying one Sep. T-Note put at 0-31/64 is referred to as buying a... |
Synthetic long call |
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A trade in Eurodollar options sells 8 Sep. 9825 calls which have a delta of 50%. To get a delta neutral position, he must buy 4 Eurodollar futures contracts...(True or False) |
True |
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A T-Bond futures option has a premium of 1-12. Its price in dollars is... |
$1,187.50 |
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Which of the following combinations of positions qualifies as a "conversion?" |
Long 1 Dec. S&P 500 futures contract at 1105.50, short 1 Dec. S&P 500 1105 call at 22.00, long 1 Dec. S&P 500 1105 put at 21.50 |
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A speculator purchases 2 Nov. 180 Unleaded Gasoline Calls at a premium of $0.0533/gal. (42,000 gal. per contract). One week later, after the market has taken a favorable bounce, he sells the calls at $0.0613. What is his return on equity? |
15.01% |
