Series 3: Exercise

Exercise

Answer true or false.

1. 1. _____ Horizontal spreads involve one put and one call, each with a different expiration date but the same strike price.
2. 2. _____ In a calendar spread, the longer-term option generally has less time value than the shorter-term option.
3. 3. _____ The time value of the deferred option in a calendar spread is more sensitive than the nearby to changes in implied volatility.
4. 4. _____ A long calendar spread investor profits when the spread narrows; a short calendar spread investor profits when the spread widens.
5. 5. _____ While a neutral calendar spread has limited profit potential, a long calendar spread’s potential profits are unlimited.
6. 6. _____ A short calendar spread, also known as a reverse calendar spread, occurs when an investor shorts the deferred option and goes long the nearby option.
7. 7. _____ A spread with two