Derivatives Trading Methods Quiz

What is the payoff to the call buyer at expiration if the price of the underlying asset is below the exercise price?

Which party pays a sum of money to receive the right to either buy or sell an underlying asset at a fixed price in an option contract?

If the price of the underlying asset is greater than the exercise price at expiration, who is 'in the money' for a call option?

What is the payoff to the put seller at expiration if the exercise price is higher than the price of the underlying asset?

When considering a call option, what does 'ST - X > 0' indicate?

What is the main difference between a futures contract and an option contract?

What is the motivation for hedgers to use options?

Which type of trader seeks to earn riskless profits through the discovery of mispriced securities?

What is the main advantage of options over futures in terms of payoffs?

What does a put option holder have the right to do?

What is the profit earned by selling 100 shares at $1000 each after buying them at $880 per share?

In the context of selling a Put option, if an investor sells one September put option contract on Google with a strike price of $840, what amount does the investor receive when multiplying the bid price by the number of shares?

In the scenario where the share price of Google is greater than $840, what happens to the put option?

When selling a put option, is the transaction done at the bid or offer price?

For an option seller, what is the payment required when selling a put option?

What is the main difference between futures and forward contracts?

Which statement about a short forward position is true?

What happens to gains and losses in futures contracts at maturity?

What is the essential difference between a call option buyer and a put option seller?

Which statement describes an option seller's position accurately?

What is the price of a 2-month call option with a strike of 25 if the current stock price is $20?

In options trading, what is a common risk traders face related to leverage?

What can happen when traders switch from being hedgers to speculators?

What is the value of a commodity that can be controlled with a futures contract on 50000 gallons of oil at $2 per gallon?

What percentage change in the price of heating oil leads to an 8.4% change in equity due to leverage?

What type of market are organised exchanges like the Chicago Board Options Exchange (CBOE)?

In which way do traders in the OTC market usually execute transactions?

What role did banks play in the OTC market prior to 2008?

What is the function of a central counterparty (CCP) in a transaction?

Which statement best describes the OTC market since 2008?

What happens to the stock price in an arbitrage opportunity?

What is the purpose of hedging using a long position in a forward contract?

In the context of options, what does 'put' represent?

What is the payoff to the call buyer at expiration if the price of the underlying asset is above the exercise price?

What is the payoff to the put seller at expiration if the exercise price is lower than the price of the underlying asset?

Who is considered 'in the money' for a put option if the exercise price is higher than the price of the underlying asset at expiration?

What does 'ST - X < 0' indicate for a call option holder at expiration?

When would a call option buyer face a loss at expiration?

'ST - X > 0' indicates what for a put option holder at expiration?

'ST - X = 0' represents which situation for an option holder?

What is a crucial requirement for a sale to take place?

In a sale, what must be agreed upon along with the subject of the sale?

What is a key element that must be mutually agreed upon in a sale transaction?

What is necessary to finalize a sale according to the text?

In a sale, why is mutual consent between seller and buyer important?

What is the main difference between an Ijar and a Bai’ contract?

What determines the rent in an Ijara contract?

What happens if the leased asset in an Ijara contract becomes unusable?

What is the liability of the lessee in an Ijara contract?

How is rent typically adjusted in a long-term Ijara lease?

What happens if the lessee stops using the asset in an Ijara contract without the lessor's consent?

What is a key feature of Ijar contracts that sets them apart from sales contracts?

How do Shariah scholars suggest benchmarking rent in an Ijara contract?

What protects both parties in an Ijara contract when determining rent?

What is the main distinction between Ijara and Bai’ contracts?

What happens if a leased asset in an Ijara contract becomes damaged beyond usability?

How do Shariah Scholars propose benchmarking rent in long-term Ijara leases?

What is the main liability of the lessee in an Ijara contract?

How can the rent be adjusted in a long-term Ijara lease?

What happens if a lessee stops using the asset in an Ijara contract without lessor consent?