All of the Following Are Characteristics of LEAPS Except

question 29

Multiple Choice

All of the following are characteristics of LEAPS except:

• A)LEAPS have up to two years to expiration.
• B)LEAPS have generally been limited to blue-chip stocks, such as Coca-Cola, Dow Chemical, General Electric, IBM, and others.
• C)LEAPS have the same characteristics as the short-term options, in general.
• D)LEAPS generally have lower premiums because of their length.

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Definitions:

Time Value

The idea that having money now is more valuable than having the same amount later on because of its ability to generate earnings over time.

Strike Price

The specified price at which the buyer of an option can buy (call option) or sell (put option) the underlying asset.

Call Premium

The extra amount above the par value that a bond issuer must pay to redeem a bond before its maturity date.

Net Profit

The actual profit after working expenses not included in the calculation of gross profit have been paid.