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Types of Traders and Options Analysis

The document outlines a series of questions related to trading in futures, forwards, and options markets, including types of traders, true/false statements about options, and calculations of gains or losses from various trading scenarios. It also includes questions about breakeven stock prices for specific options strategies. The content is structured as a quiz or exercise for individuals learning about trading instruments.

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vittoriafranchini
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8 views1 page

Types of Traders and Options Analysis

The document outlines a series of questions related to trading in futures, forwards, and options markets, including types of traders, true/false statements about options, and calculations of gains or losses from various trading scenarios. It also includes questions about breakeven stock prices for specific options strategies. The content is structured as a quiz or exercise for individuals learning about trading instruments.

Uploaded by

vittoriafranchini
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Introduction

1. List three types of traders in futures, forward, and options markets

i. _ _ _ _ _ _ _ _

ii. _ _ _ _ _ _ _ _

iii. _ _ _ _ _ _ _ _

2. Which of the following is not true (circle one)

a. When a CBOE call option on IBM is exercised, IBM issues more stock
b. An American option can be exercised at any time during its life
c. An call option will always be exercised at maturity if the underlying asset price is
greater than the strike price
d. A put option will always be exercised at maturity if the strike price is greater than the
underlying asset price.

3. A trader enters into a one-year short forward contract to sell an asset for $60 when the spot price
is $58. The spot price in one year proves to be $63. What is the trader’s gain or loss? Show a
dollar amount and indicate whether it is a gain or a loss.
__________

4. A trader buys 100 European call options (i.e., one contract) with a strike price of $20 and a time
to maturity of one year. The cost of each option is $2. The price of the underlying asset proves to
be $25 in one year. What is the trader’s gain or loss? Show a dollar amount and indicate whether
it is a gain or a loss.
__________

5. A trader sells 100 European put options (i.e., one contract) with a strike price of $50 and a time
to maturity of six months. The price received for each option is $4. The price of the underlying
asset is $41 in six months. What is the trader’s gain or loss? Show a dollar amount and indicate
whether it is a gain or a loss.
__________

6. The price of a stock is $36 and the price of a three-month call option on the stock with a strike
price of $36 is $3.60. Suppose a trader has $3,600 to invest and is trying to choose between
buying 1,000 options and 100 shares of stock. How high does the stock price have to rise for an
investment in options to lead to the same profit as an investment in the stock? _ _ _ _ _ _

7. A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on the
stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one put
option.
(i) What is the breakeven stock price, above which the trader makes a profit?
______
(ii) What is the breakeven stock price below which the trader makes a profit?
______

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