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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. The total number of outstanding option contracts in a given series






2. A long call position and a short put position.






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






4. An option position that involves the purchase/sale of a call and the sale (purchase of a put on the same underlying strike with the same expiration. Can also be referred to as any set of multiple purchases and sales of options.






5. The difference in the premium prices of two options - where the credit premium of the one sold exceeds the debit premium of the one purchased. A bull spread with puts and a bear spread with calls are examples of credit spreads.






6. 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.






7. 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.






8. Charge levied for the privilege ofborrowing money






9. A market drop in the price of a security






10. Same as ask price






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






12. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).






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






14. An option strategy that is neither bullish nor bearish.






15. An option that can be exercised only at expiration. Usually expire the third Friday of every month






16. 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.






17. 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.






18. A person who believes that a security - or the market in general - will rise in price; a positive or optimistic outlook.






19. An agent who facilitates trades between a buyer and a seller and receives a commission for services.






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






21. A strategy that profits from a stock price decline. It is initiated by borrowing stock from a broker -dealer and selling it in the open market. This strategy is closed (covered) at a later date by buying back the stock and turning it to the lending b






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






23. An option created as the result of a special event such as a stock split - stock dividend - merger or spin-off taking place during the life of an option. ( adjusted option may cover more than the usual one hundred shares)






24. A trading technique that involves the simultaneous purchase and sale of identical assets traded on two different exchanges with the intention of profiting by a difference in price between exchanges.






25. A short call position and a long put position.






26. An agent who facilitates trades between a buyer and a seller and receives a commission for services.






27. Received notification of an assignment by rhw options clearing corporation.






28. Amount by which an option is ITM.






29. 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






30. 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.






31. An open short option position that is offset by a corresponding stock position on a share-for-share basis. This ensures that if the owner of the option exercises - the writer of the option will not have a problem fulfilling the delivery requirements.






32. The stock price(s) at which an option strategy results in neither a profit nor a loss.






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






34. At the money






35. 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).






36. 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.






37. An investment strategy in which a long put and a short call with the same strike price and expiration are combined with long stock to lock in a nearly risk-less profit. (by purchasing 100 shares of XYZ stock at 50 - writing 1 XYZ Jan 50 call - and bu






38. The date an option contract becomes void.






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






40. An option whose underlying asset is an index.






41. The use of money to create more money through an appreciating or income-producing asset.






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






43. An option that has no intrinsic value.






44. 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.






45. A short option position that is not fully collateralized if notification of assignment is received. A short call position is uncovered if the writer does not have a long stock or long call position. A short put is naked if the writer is not short sto






46. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).






47. An order that is designated to be executed on or before the expiration date. (all or none)






48. The difference in the premium prices of two options - where the credit premium of the one sold exceeds the debit premium of the one purchased. A bull spread with puts and a bear spread with calls are examples of credit spreads.






49. 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.






50. Calculations performed on updated prices.