1) you own a stock and you're concerned that the price of the stock may decline. What might you do to minimize risk of loss? A Buy a put. B buy a call. C write a put. D buy a warrant
2) at a single time a stocks price is $10 and the premium for a call option on the stock is $3. The strike price on the option is $8. How should you explain the additional value of the premium over the difference between strike price and stock price?
A the stock price and option price may have been quoted at different times when stock values where different.
B the market value of the premium equals the difference between the strike price and the market value of the stock.
C the market value of the option premium equals the difference between the stock market value and the strike price plus a time premium D the hypothetical price of the option is less than the time premium