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5. What is a Derivative Security?
a. An agreement to buy or sell an asset at a fixed price on or before a certain date.
b. An Option.
c. A Future.
d. All of the above.

 

6. With respect to Options, buying a call means:
a. A strategy to diversify a portfolio.
b. An obligation to buy the underlying stock.
c. A right to purchase the underlying stock
d. None of the above.

7. A Credit Default Swap is:
a. An exchange of a fee for a payment if a credit default event occurs.
b. A transaction for which a buyer fails to pay.
c. A failed promise to deliver a sold commodity.
d. An exchange or promises to sell an asset.

 

8. When writing/selling a Call option in an opening transaction, the writer:
a. Has the right to buy the underlying asset, if assigned.
b. Has the obligation to deliver the underlying asset, if assigned
c. Can cancel the transaction.
d. Can hedge the underlying position.

9. Buying a Put option gives the purchaser:
a. The right to sell the underlying instrument at the strike price.
b. The obligation to sell the stock at the strike price.
c. Both of the above.
d. None of the above.

10. In Options, the “Delta” refers to:
a. The change of an option’s price for a 1point change in the price of the underlying security or commodity.
b. The difference between the option’s market price and the price at expiration.
c. The amount required to be margined.
d. None of the above.

11. In Options, the “Gamma” refers to:
a. The opposite of Delta
b. Another word for the strike price
c. The measuring of the “convexity” of a derivative’s value in relation to the underlying – the higher the coupon rate, the lower the convexity or market risk.
d. The Option market price.
12. The two types of Options styles are:
a. The Put and Call.
b. The European and American.
c. LEAPS and Weeklies.
d. Bulls and Bears.

13. What are the three main types of Derivatives?
a. Futures or Forwards, Options and Swaps
b. Mortgage Backed Securities and Credit Default Swaps
c. Commodities, Stocks and Stock Indexes
d. None of the above

14. The two parts that make up the Options Premium are:
a. Intrinsic and Time values.
b. The long and short positions.
c. The hedged and non-hedged positions.
d. An underlying security and future.

 

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