Options Trading Millionaires Test

Question 1

Assume Nifty is at 4450 on April 27.
Mr.
Charles, an investor, engages in a short straddle by selling a May 4500 Nifty call for 122 rupees and a May 4500 Nifty put for 85 rupees.
What will Mr.
Charles' net profit be if the Nifty closes at 5000?

Accepted Answer

-293

Answer

0

Answer

93

Answer

Unlimited

Question 2

Assume that in May, Nifty stands at 4500. Mr. Niel, an investor, executed a short strangle by selling a Rs. 7000 Nifty call for Rs. 43 and a Rs. 4300 Nifty point for Rs. 23 in premium. Give Mr. Neil's break-even point.

Accepted Answer

4766, 4234

Answer

4500, 4210

Answer

4710, 4821

Answer

4560, 4300

Question 3

Which markets are a short call condor appropriate for?

Accepted Answer

Highly volatile markets

Answer

Bearish only markets

Answer

Low volatility markets

Answer

All of the options are correct

Question 4

Mr. John shorts ABC Ltd. and invests the same amount in call options on the company. He has come up with a ________ plan.

Accepted Answer

Protective Call

Answer

Long strangle

Answer

Short straddle

Answer

All of the options are correct

Question 5

The risk with the collar strategy is _________.

Accepted Answer

Limited

Answer

Unlimited

Answer

Limited to premium received on call

Answer

None of the options are correct

Question 6

Indicate whether or not the following is true. "In a short straddle, an investor sells calls and puts with the same maturity but different strike prices on the same stock or index.

Accepted Answer

False

Answer

True

Question 7

What will a call option's intrinsic value be given that it has an underlying deposit of Rs. 100,000, a strike price of 97.5, and an interest rate of 2.5% per annum?

Accepted Answer

None of the options are correct

Answer

Zero

Answer

Positive

Answer

Negative