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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. A long stock position and a long put position.
Synthetic Long call
Exercise
reaking
Conversion
2. Third Friday of expiration month
Rho
Synthetic short call
Last trading day
Short
3. A long stock position and a long put position.
Intrinsic value
Short stock position
Synthetic Long call
Box spread
4. A short call position and a long put position.
Synthetic short stock
Bear spread
Ask/ask price
Expiration time
5. The month during which the expiration date occurs
Expiration month
Theoretical value (TV)
Intrinsic value
All-or-none order (AON)
6. 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.
Equity option
Black-Scholes formula
Implied volatility
Bear spread (put)
7. Another name for calendar spread.
Horizontal spread
Market on close (MOC)
Adjusted Option
Ratio write
8. An individual with the opinion that a security - or the market in general will decline in price; someone having a negative or pessimistic outlook.
Bull spread (put)
Ask/ask price
Bear
Theta
9. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.
Fill-or-kill order (FOK)
Adjusted Option
Options pricing curve
Time decay
10. Good Til Cancel
Interest rate risk
Time value
GTC
Synthetic short call
11. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.
Bull spread (put)
Reverse conversion
Options pricing curve
Credit spread
12. An option that can be exercised only at expiration. Usually expire the third Friday of every month
European-style option
Collar
Bid/bid price
Put-call ratio
13. 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.
Ratio write
Bear spread (put)
Butterfly spead (Put)
Time spread/Calendar spread/Horizontal spread
14. The price that an owner of an option can purchase (call) or sell (put) the underlying stock.
reaking
Conversion
Strike price
Straddle
15. The use of money to create more money through an appreciating or income-producing asset.
Bid/bid price
Good til cancel (GTC) order
Investment
Combination
16. A market drop in the price of a security
reaking
Short stock position
Iron butterfly
DPM
17. The month during which the expiration date occurs
Expiration month
Adjusted Option
Neutral spread
Bear spread
18. 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).
Equivalent strategy
Delta
Fences
FOK
19. An option strategy in which call options are sold against equivalent amounts of long stock. ( writing 2XYZ Jan 50 calls while owning 200 shares of XYZ stock)
Covered call/Covered call writing
Indexing
Intrinsic value
Fences
20. A position resulting from the sale of a contract or instrument that you do not own.
Spread
Index option
Synthetic long stock
Short
21. 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
LEAPS
Fences
Iron butterfly
Delta
22. A measure of actual stock price changes over a specific period of time.
Debit spread
Ask/ask price
Historic volatility
Exercise
23. 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.
Delta
Assigned
Long position
Clearinghouse
24. The risk that a change in the interest rates will negatively affect the value of an investor's holdings; generally associated with bonds - but applying to all investments
Interest rate risk
Spread
Condor spread
Series of options
25. The risk to an investor that the stock price will exactly equal the strike price of a written option at expiration. (risk to be pinned with stock)
Investment
Collar
Premium
Pin risk
26. 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.
Expiration date
Expiration month
Butterfly spread (Call)
Option
27. 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)
Synthetic short stock
Underlying
Short
Bear spread (put)
28. The date an option contract becomes void.
Interest rate risk
Reverse conversion
Future
Expiration
29. Amount by which an option is ITM.
Intrinsic value
Implied volatility
Option
Bull (or bullish) spread
30. Procedure used by the options clearing corporation to exercise in-the-money options at expiration. (75 cents or more)
Synthetic long stock
Options pricing curve
Extrinsic value
Automatic exercise
31. 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
Time value
Arbitrage
Vertical spread
Short stock position
32. An option on shares of an individual common stock.
Break-even point(s)
Expiration time
Equity option
Hedge/Hedged position
33. 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
Theta
Collar
CTA
ATM
34. The sensitivity of theoretical option prices with regard to small changes in time. Theta measures the rate of decay in the time value of options.
CTA
Hedging
Vega
Theta
35. 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
Strangle
Box spread
Fences
ATM
36. The price of an option less its intrinsic value. The entire premium of an out-of-the-money option consists of extrinsic value. This is often referred to as the time value portion of option premiums.
Credit spread
Market on close (MOC)
Interest rate risk
Extrinsic value
37. The estimated value of an option derived from a mathematical model.
Butterfly spread
Neutral
Conversion
Theoretical value (TV)
38. A short stock position and a long call position.
Synthetic long put
Edge
Pin risk
Assignment
39. 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]
Neutral spread
Time spread/Calendar spread/Horizontal spread
Gamma
Option writer
40. The simultaneous purchase and sale of options of the same class (call or put - having same underlying) at the same strike prices - but with different expiration dates - selling the short-term option and buying the long-term option.
Calendar spread
Theta
Condor spread
Short stock position
41. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.
Put-call ratio
Broker/Dealer
Option writer
Covered option
42. 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.
Butterfly spead (Put)
Neutral strategy
Open interest
Volatility
43. 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.
Leg
Series of options
Neutral spread
Cash-settled American index options (cash index)
44. An option that has no intrinsic value.
LEAPS
Out-of-the-money (OTM)
Investment
GTC
45. Calculations performed on updated prices.
Indexing
Butterfly spread (Call)
Analytics
Short stock position
46. Amount by which an option is ITM.
Synthetic short stock
Intrinsic value
Index
Bull spread (put)
47. 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.
Volatility
Implied volatility
Hedging
Long position
48. A long call butterfly is created by buying one call at the lowest strike price - selling two calls at the middle strike price - and buying one call at the highest strike price. (buying 1 ABC Jan 40 call - writing 2 ABC Jan 45 calls - and buying 1 ABC
Future
Butterfly spread (Call)
Bear market
Conversion
49. 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.
Butterfly spread (Call)
Series of options
Ratio write
Synthetic short put
50. A list of the options available for the underlying stock symbols in which you are interested.
Iron butterfly
Edge
Put-call ratio
Option Chain