Options, Futures, and Derivatives Flashcards
7 cards from real CPFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Options, Futures, and Derivatives flashcards as text
A trader buys a call option with a strike price of $50 for a premium of $3. At what stock price does the trader break even at expiration?
Answer: $53
Break-even for a long call equals strike plus premium, so $50 + $3 = $53.
Which Greek measures the rate of change of an option's price with respect to a change in the underlying asset's price?
Answer: Delta
Delta measures sensitivity of the option price to changes in the underlying price.
In a futures contract, the daily process of crediting and debiting accounts based on price changes is called:
Answer: Marking to market
Marking to market adjusts margin accounts daily to reflect gains and losses.
A put option gives the holder the right to:
Answer: Sell the underlying at the strike
A put grants the right, not obligation, to sell the underlying at the strike price.
When the futures price is higher than the expected future spot price and rises with maturity, the market is in:
Answer: Contango
Contango describes futures prices above the spot, increasing with longer maturities.
An interest rate swap most commonly exchanges:
Answer: A fixed rate for a floating rate
A plain vanilla interest rate swap exchanges fixed-rate payments for floating-rate payments.
Which factor does NOT increase the value of a call option under the Black-Scholes model?
Answer: Higher strike price
A higher strike price reduces a call option's value, all else equal.