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T/F questions A calendar spread has options that differ by their expiration date A vertical spread...

T/F questions

A calendar spread has options that differ by their expiration date

A vertical spread gets its name from the option’s positions in an option chain.

A call option writer has the obligation to sell at the spot price if the call option buyer decides to exercise.

A call option buyer can always buy at the spot price if it’s to their advantage. TRUE or FALSE

A 1 year option that can ONLY be exercised at the END of each calendar quarter is an example of a European option.

Solutions

Expert Solution

1. TRUE : Calender spread is the strategy where we short the near expirt date options and and buy the far expiry date options with the same strike price. Therefor statement is true that "A Calender spread has options that differ by their expiration date"

2. Currently i am not having the knowledge of Vertical spread properly you may get this answer from another expert having this knowledge.

3. TRUE : A call option buyer has a right to excercise to buy the underlying Asset from call writer. Therefor whenever he wants to exercise the same then call option writer is obliged to sell at the Spot price.

4. TRUE : A call option buyer has a right to excercise to buy the underlying Asset from call writer. So whwnever it is to their advantage he can always buy the same.

5. FALSE : European option is the option which can be exercised at the time of expiry only and not before that. In the given question since option can be excercised at certain fix date before expiry therefor it is a example of Bermudian option.

jeff jeffy answered 1 year ago
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