Hull:Options,Futures,andOtherDerivatives,NinthEditionChapter12:TradingStrategiesInvolvingOptionsMultipleChoiceTestBank:QuestionswithAnswers1.Whichofthefollowingcreatesabullspread?A.BuyalowstrikepricecallandsellahighstrikepricecallB.BuyahighstrikepricecallandsellalowstrikepricecallC.BuyalowstrikepricecallandsellahighstrikepriceputD.BuyalowstrikepriceputandsellahighstrikepricecallAnswer:AAbullspreadiscreatedbybuyingalowstrikecallandsellingahighstrikecall.Alternatively,itcanbecreatedbybuyingalowstrikeputandsellingahighstrikeput.2.Whichofthefollowingcreatesabearspread?A.BuyalowstrikepricecallandsellahighstrikepricecallB.BuyahighstrikepricecallandsellalowstrikepricecallC.BuyalowstrikepricecallandsellahighstrikepriceputD.BuyalowstrikepriceputandsellahighstrikepricecallAnswer:BAbearspreadiscreatedbybuyingahighstrikecallandsellingalowstrikecall.Alternatively,itcanbecreatedbybuyingahighstrikeputandsellingalowstrikeput.3.Whichofthefollowingcreatesabullspread?A.BuyalowstrikepriceputandsellahighstrikepriceputB.BuyahighstrikepriceputandsellalowstrikepriceputC.BuyahighstrikepricecallandsellalowstrikepriceputD.BuyahighstrikepriceputandsellalowstrikepricecallAnswer:AAbullspreadiscreatedbybuyingalowstrikecallandsellingahighstrikecall.Alternatively,itcanbecreatedbybuyingalowstrikeputandsellingahighstrikeput.4.Whichofthefollowingcreatesabearspread?A.BuyalowstrikepriceputandsellahighstrikepriceputB.BuyahighstrikepriceputandsellalowstrikepriceputC.BuyahighstrikepricecallandsellalowstrikepriceputD.BuyahighstrikepriceputandsellalowstrikepricecallAnswer:BAbearspreadiscreatedbybuyingahighstrikecallandsellingalowstrikecall.Alternatively,itcanbecreatedbybuyingahighstrikeputandsellingalowstrikeput.5.Whatisthenumberofdifferentoptionseriesusedincreatingabutterflyspread?A.1B.2C.3D.4Answer:CThreedifferentoptionsallwiththesamematurityareinvolvedincreatingabutterflyspread.Thestrikepricesareusuallyequallyspaced.Thecreatorbuysthelowstrikeoption,buysthehighstrikeoption,andsellstwooftheintermediatest...
