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DRM Options Positions Profit Calculation Quiz

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DRM Options Positions Profit Calculation Quiz

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Questions and Answers

What is the profit from buying one European call option as per the provided information?

$100

$90 (correct)

$70

$80

What is the profit from writing one European call option with a strike price of $100?

$70 (correct)

$110

$130

$120

What is the profit from buying a European put option with a strike price of $70?

$20 (correct)

$-7

$10

What is the profit from writing a European put option with a strike price of $70?

$-10 Signup and view all the answers

What is the key difference between options and futures/forward contracts?

Futures/forward contracts involve an obligation with no upfront fee, while options give the right but not the obligation with an option premium. Signup and view all the answers

In a call option, when does an investor buy a call option?

To buy the underlying asset at a predetermined price Signup and view all the answers

What is the relationship between the buyer and seller in options contracts?

Buyer has a long position, and seller has a short position Signup and view all the answers

In a forward contract, when does the settlement typically occur?

At the end of the contract Signup and view all the answers

What is the main difference between futures and forwards contracts?

Futures contracts are exchange-traded, while forwards are private contracts. Signup and view all the answers

What is the pay-off from a long position in a futures contract based on?

$ST - K$ Signup and view all the answers

What does an options contract provide the buyer with?

The right without obligation to buy or sell at a fixed price Signup and view all the answers