Options Basics · quiz

Options Basics quiz

Calls and puts, buyers and sellers, delta and gamma, expiry days and dealer hedging.

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Calls, puts and who's on the other side

1. You buy a $105 call for $2.00 (100 shares per contract). What's the most you can lose?

2. Why do dealers hedge the options they sell?

3. A call has a delta of 0.50. The stock rises $1. Roughly how much does the call's price change?

4. When is gamma usually largest?

5. Dealers are short gamma. Price starts rallying. What does their hedging tend to do?

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