Question

1. Which one of the following statements is true?

1. As time goes by calls increase in value.
2. The “stock repair strategy” involves selling stock and buying calls.
3. The price of an expensive option is less than its value.
4. The “collar or hedge wrap” involves buying in the money puts and selling in the money calls.
5. If assigned the seller of a put would be long stock.

2. Which one of the following statements is false?

1. Options never expire worthless
2. If assigned the seller of a call would deliver stock.
3. Total dollars equal 1/100 times per share quoted price.
4. Selling contracts results in a cash inflow.
5. The Collar protects long stock while allowing for modest upside gain.

Answer 1

1. If you are selling the put option, it will mean that you are having a bullish view on the stock because put seller will be holding an equivalent position to the buyer of call option or going long on the stock.

All the other options are false.

correct answer will be option (e) if assigned the seller of a put, would be long stock.

2. Options are expiring worthless because options generally lose their value if they are not able to achieve with their strike price so those options who are not exercised, because they are deep out-of-the-money at the time of the expiration will generally be losing all of its value and they will expire worthless.

All the other options are true.

Correct answer will be option A options never expire worthless.