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Options Trading

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. A long stock position and a long put position.






2. 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.






3. 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.






4. 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






5. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.






6. A strategy involving two or more options of the same type (or options combined with an underlying stock position) that will profit from a rise in the price of the underlying stock. Consists or selling an option with a higher strike - and buying an op






7. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.






8. Opening sale of a security.






9. The sensitivity of theoretical option prices with regard to small changes in interest rates. Increases in interest rates lead to higher call values and lower put values. Lower interest rates do the opposite.






10. An order that is designated to be executed on or before the expiration date.






11. A contract between a buyer and seller whereby the buyer acquires the right - but not the obligation - to buy a specified underlying instrument at a fixed price on or before a specified date.






12. The process by which the seller of an option is notified of the buyer's intention to exercise that option.






13. A prolonged period of falling prices. A bear market in stocks is usually brought on by the anticipation of declining economic activity.






14. An option whose underlying asset is an index.






15. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.






16. The total price of an option: intrinsic value plus extrinsic value






17. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.






18. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.






19. A a feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.






20. The ratio of trading volume in put options to the trading volume in call options. The ratio provides a quantitative measure of the bullishness or bearishness of investors.






21. The sensitivity of an options theoretical value to a change in implied volatility.






22. An order to buy or sell at the last price on the close.






23. 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






24. Another name for calendar spread.






25. Term used to describe the ownership of a security - contract - or commodity that grants the owner the right to transfer ownership by sale or gift.






26. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.






27. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.






28. 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.






29. Designated primary market maker.






30. A strategy involving two or more options of the same type that will profit from a decline in the underlying stock. Consists of buying an option with a higher strike and selling an option with a lower strike. The maximum risk will be realized if the u






31. The time of day by which all exercise notices must be received on the expiration date.






32. 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.






33. The simultaneous purchase and sale of options of the same class at different strike prices - but with the same expiration date. (ABC April 150/155 call spread. you purchase the ABC Apr 150 call and sell the ABC Apr 155 call). similar to the outright






34. Evaluating an options value through the use of a pricing model allows one to determine the theoretical value of the option(price you would expect to pay in order to break even)






35. A a feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.






36. The total price of an option: intrinsic value plus extrinsic value






37. Calculations performed on updated prices.






38. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.






39. A long put butterfly is established by buying one put at the lowest strike price - writing two puts at the middle strike price - and buying one put at the highest strike price.






40. Term used to describe how the theoretical value of an option 'erodes' or reduces with the passage of time. Time decay is specifically quantified by Theta.






41. A type of order that requires that the order be executed completely or not at all.






42. This formula can be used to calculate a theoretical value for an option using current stock prices - expected dividends - the option's strike price - expected interest rates - time to expiration - and expected stock volatility.






43. A type of order that requires that the order be executed completely or not at all.






44. A short stock position and a short put position.






45. 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.






46. An investment strategy in which stock is purchased and call options are written on a greater than one-for-one basis.More calls written than the equivalent number of shares purchased.






47. An investment strategy in which stock is purchased and call options are written on a greater than one-for-one basis.More calls written than the equivalent number of shares purchased.






48. In a customer transaction - edge refers to the markup or markdown price that a market maker generates in the deal. It can be thought of as a tax charged by the market maker for services rendered.






49. A short stock position and a long call position.






50. The combination of a vertical and a calendar spread - wherein the investor buys and sells options of the same class at different expiration dates and different strike prices.