Which of the following statements is FALSE? A) Because a short position in an option is...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Which of the following statements is FALSE? A) Because a short position in an option is the other side of a long position, the profits from a short position in an option are just the negative of the profits of a long position. B) The deeper out-of-the-money the put option is, the less negative its beta, and the higher is its expected return. C) Although payouts on a long position in an option contract are never negative, the profit from purchasing an option and holding it to expiration could well be negative because the payout at expiration might be less than the initial cost of the option. D) The put position has a higher return in states with low stock prices; that is, if the stock has a positive beta, the put has a negative beta. Which of the following statements is FALSE? A) Because a short position in an option is the other side of a long position, the profits from a short position in an option are just the negative of the profits of a long position. B) The deeper out-of-the-money the put option is, the less negative its beta, and the higher is its expected return. C) Although payouts on a long position in an option contract are never negative, the profit from purchasing an option and holding it to expiration could well be negative because the payout at expiration might be less than the initial cost of the option. D) The put position has a higher return in states with low stock prices; that is, if the stock has a positive beta, the put has a negative beta.
Expert Answer:
Answer rating: 100% (QA)
Which of the following statements is FALSE A Because a short position in an option is the other side of a long position the profits from a short posit... View the full answer
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
Posted Date:
Students also viewed these accounting questions
-
N balls labeled 1 through N are placed in Box 1 while a Box 2 is initially empty. At each time instant, one of the N balls is chosen (with equally probability) and moved to the other box. Let X [k]...
-
A physics textbook weighing 22 N rests on a desk. The coefficient of static friction between the book and the desk is μs = 0.60; the coefficient of kinetic friction is μk...
-
N sources of current with different emf's are connected as shown in Fig. 3.40. The emf's of the sources are proportional to their internal resistances, i.e. ε = aR, where a is an assigned...
-
You have been asked, as a consultant, by the chief compliance officer of a multi-facility health system to assist in evaluating the organizations current enterprise-wide coding compliance plan for...
-
You need $28,974 at the end of 10 years, and your only investment outlet is an 8 percent long-term certificate of deposit (compounded annually). With the certificate of deposit, you make an initial...
-
Suzanne Thompson is a certified public accountant (CPA) and staff accountant for Deuel and Soldner, a local CPA firm. It had been the policy of the firm to provide a holiday bonus equal to two weeks...
-
Fraud deterrence is centered on the fear of getting caught and the fear of getting punished. In your opinion, which is stronger and why?
-
Balance sheet data for Bryant company on December 31, the end of the fiscal year, are shown below. Prepare a comparative balance sheet for 2012 and 2011, stating each asset as a percent of total...
-
A 25-year-old Latin, G1P1, cisfemale presents to the office with a 6-month history of amenorrhea; reports having regular menstrual cycles every month up until about 1 year ago when her menstrual...
-
You have recently been promoted to be director of advertising for the Timkin Tool Company. In your first meeting with Mr. Timkin, he says, Advertising is a waste! Weve been advertising for six months...
-
What is the cultural significance of sport in North America and how would you say it is different from the other countries viewed in this module? Your initial thread should be a minimum of 250 words....
-
1. How could a school's comprehensive counseling program be used to provide services to make school more gender inclusive? 2. How does Austism spectrum disorder affect a student in the classroom? How...
-
Imagine an experimental drug that is harmful to individuals when consumed within one hour of eating, but helpful otherwise. Consider an observational study of the effects of this drug; your data do...
-
The business product is 'Samsung Galaxy S8' Please use the knowledge you have learned about Lean Tools in this section and apply them to your business.make a single page summary where you: 1.Choose a...
-
As you market yourself to employers, the salary you demand is essentially your personal price. Be creative as you prepare your strategya novel approach could give you an edge in a competitive job...
-
2. Galadriel Company began operations on 1/1/22 and produces tumbling mats and rebound mats for gymnastics. Both products are manufactured from a joint process. The company uses a Product Costing...
-
Discuss any THREE (3) ways how the statute can be interpreted by the Courts in Malaysia. (30 marks) Based on the Contracts Act 1950, explain any THREE (3) ways in which a contract proposal can be...
-
What mass of KBr (in grams) should you use to make 350.0 mL of a 1.30 M KBr solution?
-
Three of your friends (Jean, Evan, and Lee) are having an argument about investments and, because you have taken this course, have come to you for advice. The possible investments are set out in the...
-
The current price of TSY Inc. is $75. In one year, the price could be either $50 or $100. The risk-free rate is 5 percent per year. Construct a portfolio with the same payoff as a call option. What...
-
We can calculate cash flow from operations (CFO) as net income + non-cash expenses + change in working capital. In year 2, the change in working capital for Finns Fridges was $25. Find the CFO and...
-
In Problem 102, using an interest rate of 10 percent, what uniform series over the closed interval [1,8] is equivalent to the cash flow profile shown? Data from problem 102 Consider the following...
-
In Problem 102, using an interest rate of 8 percent, what single sum of money occurring at the end of year 8 is equivalent to the cash flow profile shown? Data from problem 102 Consider the following...
-
Consider the following cash flow profile: With a compounded annual interest rate of 6 percent, what single sum of money at the end of the sixth year will be equivalent to the cash flow series? EOY...
Study smarter with the SolutionInn App