If You Were to Purchase an October Option with an Exercise

question 65

Multiple Choice

If you were to purchase an October option with an exercise price of 50 for 8 and simultaneously sell an October option with an exercise price of 60 for 2,you would be

• A) Bullish and taking a high risk.
• B) Bullish and conservative.
• C) Bearish and taking a high risk.
• D) Bearish and conservative.
• E) Neutral.

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Definitions:

Aggregate Demand

The grand sum of demands for all products and services within an economy, fixed at a standard price range during a certain time period.

Expected Inflation Rate

The expected inflation rate is the anticipated annual increase in the average price level of goods and services within an economy.

Actual Inflation Rate

The rate at which the general level of prices for goods and services is rising, and subsequently purchasing power is falling, measured over a particular period.

Short-run Phillips Curve

A graphical representation that shows the inverse relationship between the rate of inflation and the rate of unemployment in an economy over a short period.