Chapter 11 Trading Strategies Involving Options

8) What is a description of the trading strategy where an investor sells a 3-month call option and buys a one-year call option, where both options have a strike price of $100 and the underlying stock price is $75?

A) Neutral Calendar Spread

B) Bullish Calendar Spread

C) Bearish Calendar Spread

D) None of the above

9) Which of the following is correct?

A) A diagonal spread can be created by buying a call and selling a put when the strike prices are the same and the times to maturity are different

B) A diagonal spread can be created by buying a put and selling a call when the strike prices are the same and the times to maturity are different

C) A diagonal spread can be created by buying a call and selling a call when the strike prices are different and the times to maturity are different

D) A diagonal spread can be created by buying a call and selling a call when the strike prices are the same and the times to maturity are different

10) Which of the following is true of a box spread?

A) It is a package consisting of a bull spread and a bear spread

B) It involves two call options and two put options

C) It has a known value at maturity

D) All of the above

11) How can a straddle be created?

A) Buy one call and one put with the same strike price and same expiration date

B) Buy one call and one put with different strike prices and same expiration date

C) Buy one call and two puts with the same strike price and expiration date

D) Buy two calls and one put with the same strike price and expiration date

12) How can a strip trading strategy be created?

A) Buy one call and one put with the same strike price and same expiration date

B) Buy one call and one put with different strike prices and same expiration date

C) Buy one call and two puts with the same strike price and expiration date

D) Buy two calls and one put with the same strike price and expiration date

13) How can a strap trading strategy be created?

A) Buy one call and one put with the same strike price and same expiration date

B) Buy one call and one put with different strike prices and same expiration date

C) Buy one call and two puts with the same strike price and expiration date

D) Buy two calls and one put with the same strike price and expiration date

14) How can a strangle trading strategy be created?

A) Buy one call and one put with the same strike price and same expiration date

B) Buy one call and one put with different strike prices and same expiration date

C) Buy one call and two puts with the same strike price and expiration date

D) Buy two calls and one put with the same strike price and expiration date