Enter our Weekly Trivia Contest and Win!!!

[Nicole Seaman]

Head on over to our Facebook page to enter our Trivia Contest! You will be entered to win a $15 gift card of your choice from Starbucks, Amazon or iTunes (iTunes is US only)!

If you do not have Facebook, you can enter right here in our forum. Just answer the following questions:

OPTION TRADE DIAGRAMS

Question 1:

A. Short call
B. Long Put
C. Write covered call (long stock + short call)
D. Buy protective put (long stock + long put)


Question 2:

A. Short call
B. Long Put
C. Write covered call (long stock + short call)
D. Buy protective put (long stock + long put)


Question 3:

A. Straddle write
B. Straddle purchase
C. Bull spread with calls
D. Bear spread with puts


Question 4:

A. Straddle purchase
B. Bull spread with calls
C. Bull spread with puts
D. Bear spread


Question 5:

A. Butterfly spread
B. Calendar spread
C. Strip and strap
D. Box spread

 

[thenewguy]

1.C
2.D
3.A
4.B
5.B

 

[junecello]

1. C
2. D
3. A
4. B
5. B

 

[David Harper CFA FRM]

one of them is a little harder than it maybe looks

 

[mshah6490]

1. C
2. D
3. A
4. B
5. B

 

[andi2384]

1. C
2. D
3. A
4. C
5. B

 

[Alex_1]

Hi,

1. C
2.D
3. A (this is the same as a reverse straddle, right?)
4. C (with puts because there is no cash outflow (?) )
5. B

 

[Nicole Seaman]

Participation in our contest has been great this week! Make sure to get your answers in by tomorrow to be entered into our drawing!

 

[Nicole Seaman]

It is time to announce our winners for this week! Thank you all for your participation in our Facebook Trivia Contest!!

The winners are:

@Alex_1 and @mshah6490

Congratulations to our winners! Please email me at [email protected], reply to this post or start a conversation with me here on the forum to let me know if you would like to redeem your prize now or let it accrue.

Prizes:

• $15 iTunes gift card (US only)
• $15 Amazon gift card
• $15 Starbucks gift card

The correct answers to the trivia questions are as follows (please remember that winners are chosen at random based on participation and not just correct answers):

Question 1: C. Write covered call (long stock + short call)
Question 2: D. Buy protective put (long stock + long put)
Question 3: A. Straddle write
Question 4: C. Bull spread with puts
Question 5: A. Butterfly spread

 

[Rblc]

It is time to announce our winners for this week! Thank you all for your participation in our Facebook Trivia Contest!!

The winners are:

@Alex_1 and @mshah6490

Congratulations to our winners! Please email me at [email protected], reply to this post or start a conversation with me here on the forum to let me know if you would like to redeem your prize now or let it accrue.

Prizes:

• $15 iTunes gift card (US only)
• $15 Amazon gift card
• $15 Starbucks gift card

The correct answers to the trivia questions are as follows (please remember that winners are chosen at random based on participation and not just correct answers):

Question 1: C. Write covered call (long stock + short call)
Question 2: D. Buy protective put (long stock + long put)
Question 3: A. Straddle write
Question 4: C. Bull spread with puts
Question 5: A. Butterfly spread

Hello Nicole, David - sorry I know this is a very old thread. But Is it possible to provide an explanation with respect to question 4?
I have chosen like most people above answer B.

Many thanks
Rajiv

 

[David Harper CFA FRM]

A bull spread with calls is long c(k1) + short c(k2) where k2 > k1, so the short call is cheaper and there is always an initial investment. The diagram is question 4 is (deviously?) not a profit diagram but a payoff diagram (note: profit = payoff +/- premium, so profit is the net with time value of money) per the title = "Payoff excludes upfront premium". Notice this payoff is never positive. Therefore it cannot be a bull spread with calls and must be a bull spread with puts. At all S(t) > k2, the payoff is K2 - k1. A bull spread with calls has a profit capped at K2-K1; i.e., the flat horizontal line on the right side must be positive ...

On the other hand, the bull spread with puts is long p(k1) plus short put(k2) where k2 > k1, so the short put is more expensive and there is always an initial cash inflow (rather than premium outflow) and the highest payoff on this bull spread with puts must be zero (!): at any future S(t) above k2, both puts expire worthlessly. Its flat horizontal line on the right side must be zero. A bit devious, but I hope that's fun and interesting!

 

[Rblc]

Thank you very much indeed.
I should have read the title of the diagram . Very interesting . I think it's a fine idea to have quizzes like that to keep members on their toes about their knowledge.

 

[David Harper CFA FRM]

@RajivBoolell I would love to bring back the quizzes, but we have to prioritize our bandwith/resources. When GARP churns the content recklessly, it greatly taxes the EPPs.