Economics · Financial Markets

Consider the following statements regarding the technical and operational nuances of the financial derivatives market: Statement 1. An 'American Option' provides the holder with the flexibility to exercise the right at any point in time starting from the date of purchase up to and including the expiration date. Statement 2. The 'Put-Call Parity' defines the relationship between the prices of European put and call options with the same strike price and expiration date, asserting that a fiduciary call has the same value as a protective put. Statement 3. 'Contango' is a market condition where the futures price of a commodity is higher than the expected future spot price, often due to storage costs, insurance, and interest rates (cost of carry). Statement 4. In a 'Backwardation' market, the futures price is lower than the current spot price, which usually happens when there is a significant short-term shortage of the physical commodity. Statement 5. A 'Swaption' is an option that gives the buyer the right, but not the obligation, to enter into an interest rate swap agreement at a future date at a pre-agreed fixed rate. Statement 6. The 'Delta' of a vanilla put option is always a positive number between 0 and 1, indicating that its price moves in the same direction as the underlying asset. Statement 7. 'Gamma' measures the rate of change of Delta, and it is most significant for options that are 'Deep Out of the Money'. Based on these statements, which of the following is correct?