Question

Suppose you buy 100 shares of Google stock which has a current price of $1,265.13 a share. You want to ensure that you do not lose more than $200 a share. Which of the following option strategies would allow you to do this?

	A.	A covered call
	B.	A naked call
	C.	A protective put
	D.	You cannot ensure that you will not have losses with stocks

Suppose I buy 100 shares of AMD and want to limit my losses using a protective put. I am debating whether to limit my losses to $5 a share or $7 a share. What would I change in order to move my protection from $5 to $7 a share?

	A.	The premium of the call used in the strategy
	B.	The premium of the put used in the strategy
	C.	The strike price of the call used in the strategy
	D.	The strike price of the put used in the strategy

Which of the following do we do when employing a long call spread?

	A.	Buy 100 shares of the underlying stock, buy a call, sell a put on the same stock with the same expiration at a different strike price
	B.	Buy 100 shares of the underlying stock, buy a call, sell a call on the same stock with the same expiration at a different strike price
	C.	Buy a call, sell a call on the same stock with the same expiration at a different strike price
	D.	Buy a call, sell a call on the same stock with the same expiration, and the same strike price

Answer 1

I have answered the 3rd questions. Please get back to me in case of any clarifications. Hope this helps!

3) long call spread/Bull call spread can be formed by buying a call and sellin g a call on the same stock with the same expiration at a different strike price