6. Why is the exercise of an equity index option settled in cash?
To maximize time value
In fact, they are not cash-settled – they are usually physically delivered
Due to the intangible nature of equity indices
To make them "delta neutral"
7. Which of the following best describes volatility as used in the context of options?
The riskiness of the underlying asset price
The initial margin required on opening the options position
The changeability of the option's price
The option's price sensitivity
8. John has bought an option from Paul that allows him to sell 2,000 shares of Intuition Bank stock at a price of USD 38. The option can be exercised at any time over the next three months. The current forward price of Intuition Bank stock is USD 45.
American-style call option
European-style put option
American-style put option
cont - The price of the option (per share) is USD 1.50. What type of option is this?
