It Is May 19 and You Own a June European

question 87

Multiple Choice

It is May 19 and you own a June European call on ABC Corp. with an exercise price of $50. The option trades at $40 and ABC is trading at $86. What should you do?

• A) Exercise the option now and take the profits.
• B) Buy more options on ABC Corp.
• C) Sell your ABC stock before its price declines.
• D)Sit and wait until the June expiration.

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Definitions:

Null Hypothesis

A statement that there is no effect or no difference, and it is the statement being tested in statistical hypothesis testing.

Economic Concerns

Issues related to the health and functioning of an economy, including inflation, unemployment, and GDP growth.

Distribution

The spread of values within a dataset or the pattern showing how often each value occurs.

Chi-square Test

A statistical test used to determine if there is a significant difference between observed and expected frequencies in one or more categories.