Ch.21: Exchange Traded Interest Rate Options

Options are described as having an 'asymmetric' risk/payoff profile, in contrast to futures. What does this mean?

For Exchange Traded Interest Rate Options, what is the minimum number of in-the-money and out-of-the-money strikes that must be provided for each contract?

The lot size for Exchange Traded Interest Rate Options is:

Exchange Traded Interest Rate Options in India are structured as which style of options?

Which of the following products is available in the OTC Interest Rate Options market but generally NOT on the Exchange-Traded IRO market, per the workbook's comparison table?

Compared to OTC Interest Rate Options, Exchange Traded Interest Rate Options offer which key advantage?

What is the key difference in risk profile between a futures contract and an options contract, per the workbook?

Implied Volatility (IV) is best described as:

Does Implied Volatility (IV) by itself predict the direction of a future price move?

For an in-the-money call option with spot price S and exercise/strike price X, the intrinsic value is calculated as:

Which category of options (by moneyness) always has zero intrinsic value, consisting entirely of time value?

Per the workbook's worked Open Interest example, if trader A buys 1 option and trader B sells 1 option contract on Day 1, the Open Interest after this trade is:

Per the workbook's general Open Interest interpretation table, 'Rising Futures/Underlying Price combined with Rising Open Interest' is generally interpreted as a signal of:

As a contrarian indicator, a very high Put-Call Ratio (PCR) is generally read as signaling:

Per the workbook, what average PCR level is considered a suitable baseline for assessing equity options market sentiment, rather than exactly 1.0?

A call option is 'in the money (ITM)' when:

A put option is 'out of the money (OTM)' when:

In the workbook's land purchase example, Mr. X pays Mr. Y Rs.50,000 for the right (not obligation) to buy the land after 3 months at a fixed price of Rs.10,00,000. This arrangement is analogous to which type of option?

The price which an option buyer pays to the option seller to acquire the right (but not the obligation) under an options contract is called:

A call option on 6.10% GOI Securities 2031 has a premium of Rs.0.45 and a Delta of +0.55. If the underlying price is expected to rise by 0.20 (from Rs.98.80 to Rs.99.00), the new option premium is expected to be closest to:

Delta of a long call option (or a short put) is always:

Gamma is best described as:

An ATM put option has Delta -0.50 and Gamma 0.004. If the underlying moves UP by 10 points, using Change in Delta = Gamma × Change in Underlying, the new Delta is closest to:

Which option position type has positive Rho, meaning its price generally rises as interest rates increase?

A put option is priced at Rs.0.50 with a Rho of -0.05. If interest rates decrease from 5% to 4% (a 1 percentage point drop), the put's price should:

An option is trading at Rs.2.75 with a Theta of -0.05. All else constant, at what price is it expected to trade the following day?

Why is Theta described as a 'friendly Greek to the option seller'?

A November call option is trading at Rs.0.10 with a Vega of 0.02, assuming 10% underlying volatility. If volatility rises to 11%, the option price should rise to approximately:

Vega is positive for which option positions?

The Binomial option pricing model represents the underlying asset's price evolution as:

How does the Black (1976) model differ fundamentally from the original Black-Scholes model?

The Black-Scholes model (1973) calculates a theoretical option price using which five key determinants?

Which of the following is one of the five fundamental parameters that determine an option's price, per the workbook?

How do rising risk-free interest rates typically affect call and put option premiums, per the workbook's table?

How does an increase in the underlying asset's volatility affect call and put option premiums, all else equal?

For the long call above (strike Rs.98.50, premium Rs.0.20), if the underlying closes at Rs.98.25 at expiry, what is the investor's payoff?

An investor buys a call option at a strike of Rs.98.50 for a premium of Rs.0.20. Using BEP = Strike + Premium, the Break-Even Point for this long call position is:

For the long put above (strike Rs.98.50, premium Rs.0.30), if the underlying closes at Rs.98.00 at expiry, what is the investor's net profit?

An investor buys a put option at a strike of Rs.98.50 for a premium of Rs.0.30. Using BEP = Strike − Premium, the Break-Even Point is:

For a short call position, the maximum possible gain is:

For a short put position, the maximum possible loss occurs when:

Put-Call Parity, stated as C + PV(X) = P + S, holds strictly for which type of option?

The difference between option premium and intrinsic value is __________.

Option buyer faces ________ risk and option seller faces __________ risk.

The price which option buyer pays to option seller to acquire the right is called as ________.

An option is _________, if on exercising it, the option buyer gets negative cash flow.

A participant buys a put option with a strike price of Rs.98.50 at a premium of Rs.0.20. On expiry, the bond price is exactly Rs.98.50. What is his net payoff?

A dealer buys 5,000 lots of a put option at Rs.0.21 to hedge a bond holding, then squares off (sells) the position later at Rs.0.10. Using Net Gain/(Loss) = (Premium received at square-off − Premium paid), the net payoff is closest to:

A Bermudan option differs from both American and European options in that it:

Which style of option can be exercised by the buyer only on the expiration date itself, not before?

Why are options often described as 'wasting assets'?