Chapter 16 Futures Options

8) A futures price is currently 40 cents. It is expected to move up to 44 cents or down to 34 cents in the next six months. The risk-free interest rate is 6%. What is the value of a six-month put option with a strike price of 37 cents?

A) 3.00 cents

B) 2.91 cents

C) 1.16 cents

D) 1.20 cents

9) A futures price is currently 40 cents. It is expected to move up to 44 cents or down to 34 cents in the next six months. The risk-free interest rate is 6%. What is the value of a six month call option with a strike price of 39 cents?

A) 5.00 cents

B) 2.91 cents

C) 3.00 cents

D) 4.21 cents

10) Which of the following are true?

A) Futures options are usually European

B) Futures options are usually American

C) Both American and European futures options trade actively are exchanges

D) Both American and European futures options trade actively in the OTC market

11) Which of the following is true for a September futures option?

A) The expiration month of option is September

B) The option was first traded in September

C) The delivery month of the underlying futures contract is September

D) September is the first month when the option can be exercised

12) What is the cash settlement if a put futures option on 50 units of the underlying asset is exercised?

A) (Current Futures Price - Strike Price) times 50

B) (Strike Price - Current Futures Price) times 50

C) (Most Recent Futures Settlement Price - Strike Price) times 50

D) (Strike Price - Most Recent Futures Settlement Price) times 50

13) What is the cash settlement if a call futures option on 50 units of the underlying asset is exercised?

A) (Current Futures Price - Strike Price) times 50

B) (Strike Price - Current Futures Price) times 50

C) (Most Recent Futures Settlement Price - Strike Price) times 50

D) (Strike Price - Most Recent Futures Settlement Price) times 50

14) Which of the following is true?

A) A futures option is settled daily

B) A futures-style option is settled daily

C) Both a futures option and a futures-style option are settled daily

D) Neither a futures option nor a futures-style option is settled daily