Questions on Options

Lets look at some multiple choice questions which are based on the concept of options –

Q 1. Call option is in the money when

A) Strike price is more than market price

B) Strike price is less than market price

C) Strike price is equal to market price

D) Call option is never in the money

Correct answer is Option B

Q 2. At the money options means

A) When strike price is more than market price

B) When strike price is less than market price

C) When strike price is equal to market price

D) None of the above

Correct answer is Option C

Q 3. A trader bought put option of Microsoft stock at $30 strike price, current market price of stock is $36 by paying premium of $2 then

A) Trader is making $6 dollar loss

B) Trader is making $6 dollar profit

C) Trader is making $2 dollar profit

D) Trader is making $2 dollar loss

Correct answer is Option D

Q 4. A person has bought call option on index, he will profit when

A) Market is rising

B) Market is falling

C) No movement in market

D) Both A and C

Correct answer is Option A

Q 5. A person who sells option will have

A) Limited profitability

B) Limited loss

C) Unlimited loss

D) Limited profitability and unlimited loss

Correct answer is Option D

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