Options

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In the context of options, what is meant by moneyness?
The extent to which an option is in or out of the money
1 of 5
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 put option
2 of 5
It is June 1. Widgetcorp purchases a 3-month call option costing USD 5 from Enormobank. The underlying asset is a crate of widgets. Widgetcorp has the right, but not the obligation, to buy the widgets at a price of USD 100 per crate.
100
3 of 5
What is meant by time decay?
The loss of time value with the passage of time to expiration.
4 of 5
Why is the exercise of an equity index option settled in cash?
Due to the intangible nature of equity indices
5 of 5

Other cards in this set

Card 2

Front

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.

Back

American-style put option

Card 3

Front

It is June 1. Widgetcorp purchases a 3-month call option costing USD 5 from Enormobank. The underlying asset is a crate of widgets. Widgetcorp has the right, but not the obligation, to buy the widgets at a price of USD 100 per crate.

Back

Preview of the front of card 3

Card 4

Front

What is meant by time decay?

Back

Preview of the front of card 4

Card 5

Front

Why is the exercise of an equity index option settled in cash?

Back

Preview of the front of card 5

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