Blog

Which of the following is true about Honorlock for this exam?

Which browser should students use to take the midterm with Honorlock?

Which item is allowed during the exam?

Why don’t students have to pay for Honorlock in this course?

Which action will Honorlock require before the exam actually opens?

Due to regulatory and accounting guidelines, how frequently must traders monitor their positions?

The $[K]-strike put with [d] days until expiration has a premium of $[P]. The underlying currently trades at $[S]. What is the maximum loss a trader can suffer if they hold a long position in option until expiration? Enter your answer as a dollar amount, rounded to the nearest $0.01. Assume 252 trading days in a year. If the option’s net payoff is unbounded, enter 1,000,000.

A trader takes a long position in 2 call option contracts on NFLX, each with a premium of $5.00 and a contract size of 100 shares. The trader pays $1,000 in initial capital. When the position is closed, the option is worth $9.50 per share. What is the trader’s return on capital, assuming continuous compounding?

Which of the following is/are out-of-the-money?

Challenge The option margin requirement we’ve used this semester (see the equation sheet) is just one of two formulas that brokers may use to determine how much margin a trader must post to open a short position. Brokers calculate both requirements and then require the trader to post the greater of the two. To see why this matters, consider the following situation that arises with our margin requirement formula. You are in bearish on the volatility, but bullish on the price of McDonald’s stock (ticker: MCD), whose current spot price of MCD is $[S]. Under our option margin requirement, what strike price should you choose such that you would not have to post any margin (beyond the option’s price)? Enter your answer as a number of dollars per share, rounded to the nearest $0.01.