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Test your basic knowledge |
Options Trading
Start Test
Study First
Subjects
:
industries
,
business-skills
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Constructin a portfolio to match the performance of a broad-based index - such as the S&P 500. Individuals can do this by purchasing shares in an index mutual fund.
Chicago Board Options Exchange (CBOE)
Assigned
LEAPS
Indexing
2. A position established with the specific intent of protecting an existing position. (an owner of common stock may buy a put option to hedge against a possible stock price decline).
Synthetic short put
Hedge/Hedged position
Strike price
Debit spread
3. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
Series of options
reaking
Option
Collar
4. A measure of actual stock price changes over a specific period of time.
Expiration cycle
GTC
Horizontal spread
Historic volatility
5. Same as ask price
Synthetic Long call
Analytics
Offer price
Options pricing model
6. A term referring to all options of the same type- either calls or puts- having the same underlying instrument.
Class of options
Carry/Carrying charge
Contract size
Indexing
7. An agent who facilitates trades between a buyer and a seller and receives a commission for services.
Options pricing model
Broker/Dealer
Series of options
Synthetic short stock
8. The cycle of expiration dates used in short-term options trading. there are three cycles: (January - April - July - October; February - May - August - November; or March - June - September - December) Because options are traded in contracts for three
Expiration cycle
Spread
In-the-money option (ITM)
Time decay
9. An order to buy or sell at the last price on the close.
DPM
Market on close (MOC)
Ask/ask price
Implied volatility
10. The stock price(s) at which an option strategy results in neither a profit nor a loss.
Leg
Bear
Collar
Break-even point(s)
11. A long stock position and a short call position.
Synthetic short put
Arbitrage
Exercise
Open interest
12. The sensitivity (rate of change) of an option's theoretical value (assessed value) for a one dollar change in price of the underlying instrument. Expressed as a percentage - it represents an equivalent amount of underlying at a given moment in time.
Bid/bid price
Delta
Bear spread (put)
Options pricing model
13. The largest and oldest listed options exchange.
Collar
Chicago Board Options Exchange (CBOE)
Interest
LEAPS
14. Calculations performed on updated prices.
Analytics
American-style options
Uncovered option/Naked option
Arbitrage
15. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
European-style option
Leverage
Series of options
Rho
16. Two or more trading vehicles packaged to emulate another trading vehicle or spread. Because the package involves different components - price is also different - but risk is the same.
Bear
Synthetics
Intrinsic value
Series of options
17. These options can be exercised on any business dy prior to expiration and the settlement value will be based on the index close that day - settled in the cash equivalent of the amount in-the-money.
Calendar spread
All-or-none order (AON)
Cash-settled American index options (cash index)
Bull spread (call)
18. The cycle of expiration dates used in short-term options trading. there are three cycles: (January - April - July - October; February - May - August - November; or March - June - September - December) Because options are traded in contracts for three
Expiration cycle
Put-call ratio
Conversion
Premium
19. Investment strategy that has a similar risk/reward profile as another investment strategy. (a long May 60-65 call vertical spread is equivalent to a short May 60-65 put vertical spread).
Box spread
Fences
Indexing
Equivalent strategy
20. An individual with the opinion that a security - or the market in general will decline in price; someone having a negative or pessimistic outlook.
Spread
Bear
Bull (or bullish) spread
Condor spread
21. Interest rate at which brokerage firms borrow from banks to finance their clients' security positions. The call loan rate is sometimes used because the loans can be called on a 24-hour notice.
Broker loan rate
Expiration time
Index option
In-the-money option (ITM)
22. The sensitivity of an options theoretical value to a change in implied volatility.
Bull (or bullish) spread
Synthetic short call
Vega
Market on close (MOC)
23. A short stock position and a short put position.
Synthetic short call
Condor spread
Combination
Calendar spread
24. Received notification of an assignment by rhw options clearing corporation.
Assigned
Butterfly spread (Call)
Synthetic long stock
Options pricing curve
25. An option strategy that generally involves the purchase of a farther-term option (call or put) and the selling (writing) of an equal number of nearer-term options of the same type and strike price. (buying 1ITI May 60 cal[ far term portion of spread]
Time spread/Calendar spread/Horizontal spread
Bear
Ratio write
Class of options
26. A credit spread in which a rise in price of the underlying security will theoretically increase the profit value of the spread. (writing 1 XYZ Jan 55 put and buying 1 XYZ Jan 50 put)
Vega
Horizontal spread
Extrinsic value
Bull spread (put)
27. A list of the options available for the underlying stock symbols in which you are interested.
Option Chain
Interest
Synthetics
Cash-settled American index options (cash index)
28. The date on which an option and the right to exercise it cease to exist. Listed stock options expire the Saturday following the third Friday of every month.
Reverse conversion
CTA
Bear
Expiration date
29. An option strategy that involves an out-of-the-money call and an out-of-the-money put. This is normally used as a long stock protective strategy when the call is sold and the put is purchased. The opposite of this strategy - called a 'fence -' could
Covered option
Reverse conversion
Expiration time
Fences
30. A long call position and a short put position.
Equivalent strategy
Intrinsic value
Intrinsic value
Synthetic long stock
31. Same as ask price
Equity option
Synthetics
Offer price
Butterfly spread
32. A term referring to all options of the same type- either calls or puts- having the same underlying instrument.
Synthetics
Horizontal spread
Underlying
Class of options
33. A prolonged period of falling prices. A bear market in stocks is usually brought on by the anticipation of declining economic activity.
Open interest
Bear market
Black-Scholes formula
Carry/Carrying charge
34. The sensitivity of an option's delta at a given moment in time. It is the change in delta with respect to a 1-point change in the underlying. Examplee (let's say a call option with a 100 strike price has a 50 delta. If the underlying moves from 100 t
Gamma
Synthetic short put
Strangle
Iron butterfly
35. An investment strategy used by professional option traders in which a short put and long call with the same strike price and expiration are combined with short stock to lock in a price. (selling short 100 shares of XYZ stock - buying 1 XYZ May 60 cal
Synthetic short stock
Reverse conversion
Spread
Equivalent strategy
36. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
ATM
Call Option
Index
Class of options
37. The estimated value of an option derived from a mathematical model.
Investment
Clearinghouse
Theoretical value (TV)
Butterfly spread
38. The purchase or sale of an equal number of puts or calls with the same underlying - stike price - and expiration.
Straddle
Call Option
LEAPS
Black-Scholes formula
39. Procedure used by the options clearing corporation to exercise in-the-money options at expiration. (75 cents or more)
Time decay
Premium
Leverage
Automatic exercise
40. Investment strategy that has a similar risk/reward profile as another investment strategy. (a long May 60-65 call vertical spread is equivalent to a short May 60-65 put vertical spread).
Horizontal spread
Backspread
Synthetics
Equivalent strategy
41. A delta-neutral spread composed of more long options than short options on the same underlying instrument. This position generally profits from a large movement in either direction in the underlying instrument.
Butterfly spead (Put)
In-the-money option (ITM)
All-or-none order (AON)
Backspread
42. An option whose underlying asset is an index.
Calendar spread
Index option
Ask/ask price
Options pricing curve
43. An investment strategy that attempts to lower risk by buying securities that have offsetting risk characteristics. A perfect hedge eliminates risk entirely. Hedging strategies lower the return because there is a cost involved in reducing risk.
Carry/Carrying charge
Hedging
Box spread
Broker loan rate
44. The price that an owner of an option can purchase (call) or sell (put) the underlying stock.
Call Option
Good til cancel (GTC) order
Conversion
Strike price
45. A debit spread in which a decline in the price of the underlying security will theoretically increase the value of the spread. (writing 1 XYZ Jan 50 put and buying 1 XYZ Jan 55 put)
Bear spread (put)
Condor spread
Edge
Time value
46. An option strategy with limited risk and limited profit potential that involves both a long(or short) straddle - and a short (or long) strangle. (short strangle: buying 1 ABC May 90 call and 1 ABC May 90 put - and writing 1 ABC May 95 call and writin
Iron butterfly
Conversion
Butterfly spread (Call)
Premium
47. A a feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.
Early exercise
Leverage
Leg
Reverse conversion
48. The part of an options total price that exceeds its intrinsic value. Price of an out-of-money option consists entirely of time value.
Backspread
Reverse conversion
Conversion
Time value
49. A long stock position and a short call position.
Expiration cycle
Covered call/Covered call writing
Straddle
Synthetic short put
50. These options can be exercised on any business dy prior to expiration and the settlement value will be based on the index close that day - settled in the cash equivalent of the amount in-the-money.
Neutral spread
Short
Cash-settled American index options (cash index)
Bull (or bullish) spread