Questions from General Investment


Q: Why would an investor want to use index options to hedge a

Why would an investor want to use index options to hedge a portfolio of common stock? Could the same objective be obtained using options on ETFs? If the investor thinks the market is in for a fall, wh...

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Q: Assume that an investment generates the following income stream and can be

Assume that an investment generates the following income stream and can be purchased at the beginning of 2020 for $2,000 and sold at the end of 2026 for $2,200. Estimate the IRR for this investment. I...

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Q: What are LEAPS? Why would an investor want to use a

What are LEAPS? Why would an investor want to use a LEAPS option rather than a regular listed option?

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Q: What are listed options, and how do they differ from conventional

What are listed options, and how do they differ from conventional options?

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Q: What are the main investment attractions of call and put options?

What are the main investment attractions of call and put options? What are the risks?

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Q: What is a stock option? What is the difference between a

What is a stock option? What is the difference between a stock option and a derivative security? Describe a derivative security and give several examples.

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Q: What is a strike price? How does it differ from the

What is a strike price? How does it differ from the market price of the stock?

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Q: Why do call and put options have expiration dates? Is there

Why do call and put options have expiration dates? Is there a market for options that have passed their expiration dates?

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Q: Briefly explain how you would make money on (a) a

Briefly explain how you would make money on (a) a call option and (b) a put option. Do you have to exercise the option to capture the profit?

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Q: How do you find the intrinsic value of a call? Of

How do you find the intrinsic value of a call? Of a put? Does an out-of-the-money option have intrinsic value?

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