(CMSA) UNDERSTANDING OPTIONS EXAM QUESTIONS AND ANSWERS WITH COMPLETE VERIFIED SOLUTIONS GRADED A++

(CMSA) UNDERSTANDING OPTIONS EXAM QUESTIONS

AND ANSWERS WITH COMPLETE VERIFIED SOLUTIONS

GRADED A++

Define Future/Forward


Obligation to deliver or take delivery of an underlying asset

- Quantity and quality is agreed today at a fixed price for a certain delivery day in the future

- Can be cash settled or based upon other derivatives

- Forwards & Futures carry an obligation


Define Option


The right but not the obligation to buy (Call) or sell (Put) the underlying asset on or before a certain day

in the future


Define Call


Buy

Long Call - Option to buy

Short Call - Obligation to buy if called


Define Put

, Sell

Long Put - Option to sell

Short Put - Obligation to sell if called


Warrants are a type of __


Option


A buyer of a option is also called the __


Holder


A seller of an option is also called the __


Writer


What is Put Holder?


Long Put; Right to sell


What is a Put Writer?


Short Put; Obligated to buy


What is a Call holder?


Long Call; Right to buy


What is a Writer of a call?


Short Call; obligated to sell


Define Lot size


Show the amount that 1 option contract represents