Basic Options Flashcards
(15 cards)
What is the maximum gain on the purchase of a long call?
Unlimited because the underlying stock as unlimited growth
What is the maximum loss for a buyer of a long call?
The premium paid.
How do you find the break even for a buyer of a long call?
Strike price + the premium price
What is the maximum gain for the seller of a call?
The premium.
What is the maximum loss for the seller of a call?
Unlimited. Because the underlying stock has unlimited growth potential.
What is the break even for the seller of a call?
Premium + strike price.
What is an uncovered or naked call?
The underlying security is not owned by the seller
What is the maximum gain for the buyer of a put?
Strike price - the premium.
What is the maximum loss for the buyer of a long put?
Premium
What is the break even for a buyer of a put?
Strike price - premium.
If you are selling a put, what do you believe will happen to the underlying stock?
The price of the stock will rise.
What is an options class?
All options of the same type with the same underlying security.
What is an options series?
They are all the same class with the same expiration month and same exercise price.
What is the OCC and what do they do?
Options Clearing Corporation. They issue and and guarantee the options.
How do you calculate the break even point for a long call?
Strike price + premium
