FUNDAMENTALS OF FUTURES AND
OPTIONS MARKETS 9TH EDITION JOHN C
HULL TEST BANK COMPREHENSIVE TEST
PAPER 2026 COMPLETE ANSWERS
ACCURATE
⫸ What 3 things can happen once an option has been bought? Answer:
1) The buyer can exercise it
2) The buyer or seller can offset it
3) It expires worthless without ever being used
⫸ Strike Price Answer: "exercise price", is the set price at which the
underlying asset can be bought or sold when an option is exercised
⫸ What is this an example of? If a put option has a strike price of $50,
exercising it allows you to sell the stock for $50, no matter what the
current market price is. Answer: Strike Price
⫸ Exercising a long put option initially gives you... Answer: A short
futures position
⫸ To offset an existing long call position, an option trader must take
which action? Answer: Sell a call
, ⫸ Call Option Answer: The right to buy at a fixed price
⫸ A call option is out of the money when the futures price is below the
options strike price Answer: True
⫸ Meaning of the term Out-Of-The-Money Answer: when exercising it
would not be profitable
⫸ December corn futures are trading at 480 cents/bu. December 475
puts (Strike price = 475 cents/bu) are trading at premium of 7 cents/bu.
What is the time value of these puts? Answer: 7 cents/bu
⫸ Time Value Answer: Is the portion of an option's price that reflects
the potential for profit before the option expires
⫸ Intrinsic Value Answer: "Real Value", refers to the actual, immediate
value of an option if it were exercised right now
⫸ Premium Answer: Time Value + Intrinsic Value
⫸ Put options are said to be At-the-Money when futures are trading at
put's option's strike price Answer: True
⫸ At-the-Money Answer: The current market price of the underlying
asset is equal (or very close) to the strike price of the option
OPTIONS MARKETS 9TH EDITION JOHN C
HULL TEST BANK COMPREHENSIVE TEST
PAPER 2026 COMPLETE ANSWERS
ACCURATE
⫸ What 3 things can happen once an option has been bought? Answer:
1) The buyer can exercise it
2) The buyer or seller can offset it
3) It expires worthless without ever being used
⫸ Strike Price Answer: "exercise price", is the set price at which the
underlying asset can be bought or sold when an option is exercised
⫸ What is this an example of? If a put option has a strike price of $50,
exercising it allows you to sell the stock for $50, no matter what the
current market price is. Answer: Strike Price
⫸ Exercising a long put option initially gives you... Answer: A short
futures position
⫸ To offset an existing long call position, an option trader must take
which action? Answer: Sell a call
, ⫸ Call Option Answer: The right to buy at a fixed price
⫸ A call option is out of the money when the futures price is below the
options strike price Answer: True
⫸ Meaning of the term Out-Of-The-Money Answer: when exercising it
would not be profitable
⫸ December corn futures are trading at 480 cents/bu. December 475
puts (Strike price = 475 cents/bu) are trading at premium of 7 cents/bu.
What is the time value of these puts? Answer: 7 cents/bu
⫸ Time Value Answer: Is the portion of an option's price that reflects
the potential for profit before the option expires
⫸ Intrinsic Value Answer: "Real Value", refers to the actual, immediate
value of an option if it were exercised right now
⫸ Premium Answer: Time Value + Intrinsic Value
⫸ Put options are said to be At-the-Money when futures are trading at
put's option's strike price Answer: True
⫸ At-the-Money Answer: The current market price of the underlying
asset is equal (or very close) to the strike price of the option
