Session 14 — Options & Hedging • True/False Quiz

1) A call gives the buyer the right to buy the stock at the strike by expiration.

2) The most you can lose on a long call is unlimited.

3) Selling a naked call has limited risk.

4) Time decay (theta) usually hurts buyers of options as days pass, all else equal.

5) Higher implied volatility generally makes options more expensive (other inputs fixed).

6) Open interest is the same thing as today’s trading volume.

7) U.S. equity options are usually American-style, so they can be exercised any time before expiration.

8) It’s always optimal to early-exercise a call on a non-dividend-paying stock.

9) A protective put (stock + long put) sets a floor on losses near the put strike (minus premium).

10) A covered call increases upside potential beyond owning the stock alone.

11) A “zero-cost collar” always costs exactly $0 and never caps upside.

12) Delta for a deep out-of-the-money call is typically close to +1.

13) Vega measures an option’s sensitivity to interest rates.

14) A short call can be assigned early under American-style rules (e.g., around dividends).

15) Buying options benefits from theta decay.

16) Selling a put obligates you to buy the stock at the strike if assigned.

17) Option chains list guarantees of future returns.

18) Hedging a stock with a long put automatically reduces upside by capping gains.

19) After earnings, implied volatility usually expands, boosting long options (“IV pop”).

20) A long call debit spread has capped downside (debit paid) and capped upside (short strike).