Your answer, The option is at the money., was incorrect. The correct answer was: The option is at parity. An option is at parity when its premium equals its intrinsic value. A call option has intrinsic value when the stock is trading above the call's strike price. In this example, the stock is at 40 and the call's strike price is 35, so the option is in the money by 5 points. The option is said to be trading at parity and there is no time value because the option's premium is 5. Reference: 4.1.4.5 in the License Exam Manual.

When Should You Exercise Your Employee Stock Options? You can’t exercise them after they expire either. What else would you do with the money? Study 68 Test 2 flashcards. It changes slowly near expiration if the option is at-the-money. The relationship between the option price and the exercise price. Option exercise and assignment always. Even though the option series has expired in the money, the exercise assignment process will conclude with 5,750.

Your answer, II and III., was correct! The investor purchased a long straddle (both a call and put with the same strike prices and expiration months). Giovanni Allevi Panic Pdf Viewer. While straddle investors are uncertain about the direction of the market, long straddles require substantial price movement (volatility) for profit because the two premiums paid must be recovered. In this example the breakeven of the call is found by adding the total premiums of 4 to the call strike price of 25 (25 + 4 = 29). The breakeven of the put is found by subtracting the total premiums of 4 from the put strike price of 25 (25 − 4 = 21). The market must either move up by 4 (total premiums paid) or down by 4 to be at breakeven. For profit, the market must be above or below the breakeven points.

Reference: 4.4.2.1 in the License Exam Manual. As a registered representative you often have customers who are interested in learning about derivative products such as options and different derivative strategies. Of the following customer profiles which would writing calls be considered least suitable for? A) Miss Smith, age 41, able to add to her savings each month after living expenses from her monthly income. Currently building retirement account balances in an IRA and company sponsored 401k plan. Recently investing in an income producing vacation property her savings outside of retirement accounts currently total $70,000. Growth is listed on her investment account as her objective.

Jones, both retired, covering monthly expenses with their social security and annual mandatory IRA withdrawals. Savings outside of retirement accounts total $25,000. Income is the investment objective listed on the account. Clark, a small business owner nearing the sale of his business to take an early retirement at age 52. A lump sum annuity has been in place in anticipation of the early retirement and the business sale proceeds will be more than adequate for his early anticipated living expenses. Current savings total $55,000 and his investment account objective is growth. Johnson, both young professionals with a combined annual income of $80,000.

Atlante Di Neuroscienze Di Netter Pdf Free here. Both making small annual IRA contributions and participating in company sponsored 401k plans. Mrs Johnson will also be eligible for pension plan payments after retirement several years away. Current savings total $25,000 and their joint investment account objective is growth. Your answer, Mr. Jones, both retired, covering monthly expenses with their social security and annual mandatory IRA withdrawals.

Savings outside of retirement accounts total $25,000. Income is the investment objective listed on the account., was correct! While these profiles offer some guidance and any of them could be considered incomplete to some extent the one for whom writing calls would be considered the least suitable is the retired joint account; Mr. Factors to note would be the nominal total savings and that both are in retirement needing social security and mandatory IRA withdrawals to meet current living expenses. Consider that while writing calls brings income into an account it is a strategy that is high in risk with an unlimited maximum loss potential; not suitable for a retired couple in their position. Reference: 4.2.2.6 in the License Exam Manual.