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Options Trading
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industries
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business-skills
Instructions:
Answer 50 questions in 15 minutes.
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study here
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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. 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.
Bear spread (put)
Combination
Long position
Clearinghouse
2. A contract to buy or sell a predetermined Quantity of a commodity or financial product for a specific price on a given date.
Premium
Future
Strangle
Covered call/Covered call writing
3. An option that can be exercised only at expiration. Usually expire the third Friday of every month
European-style option
Interest
Horizontal spread
Series of options
4. A measure of actual stock price changes over a specific period of time.
Interest
Historic volatility
Call Option
Underlying
5. 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.
Expiration date
Theta
Covered option
American-style options
6. A contract that gives the owner the right - if exercised - to buy or sell a security at a specific price within a specific time limit.
Gamma
American-style options
Strangle
Option
7. A debit spread in which a rise in the price of the underlying security will theoretically increase the value of the spread. (buying 1 XYZ Jan 50 call and writing 1 XYZ Jan 55 call)
Bull spread (call)
Call Option
Leverage
Condor spread
8. At the money
Good til cancel (GTC) order
ATM
Break-even point(s)
Expiration cycle
9. 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)
Bull spread (put)
Class of options
Neutral spread
Time spread/Calendar spread/Horizontal spread
10. At the money
Calendar spread
ATM
Options pricing model
Butterfly spead (Put)
11. An option whose underlying asset is an index.
Index option
Calendar spread
Bear spread (call)
Expiration date
12. Fill-or-kill order
FOK
Expiration cycle
Bear
Assigned
13. A position resulting from the sale of a contract or instrument that you do not own.
Gamma
Long position
Rho
Short
14. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.
Indexing
Delta
Strangle
Bear spread
15. 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.
Volatility
Break-even point(s)
ATM
Broker loan rate
16. The degree to which the price of an underlying tends to fluctuate over time. This variable - which the market implies to the underlying - may result from pricing an option through a model.
Edge
Long position
Strangle
Volatility
17. An option that has intrinsic value
Series of options
In-the-money option (ITM)
Uncovered option/Naked option
Credit spread
18. 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.
Time value
Implied volatility
Assigned
Indexing
19. An option that can be exercised only at expiration. Usually expire the third Friday of every month
Interest rate risk
Debit spread
European-style option
LEAPS
20. A long call position and a short put position.
Time decay
Synthetic long stock
Option writer
Covered option
21. A long stock position and a long put position.
Short stock position
Expiration date
Synthetic short put
Synthetic Long call
22. 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
Premium
Collar
Synthetic short stock
Time value
23. 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
Clearinghouse
Assignment
Fences
Assigned
24. A list of the options available for the underlying stock symbols in which you are interested.
Vertical spread
Strangle
Option Chain
Selling short
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]
Calendar spread
Time spread/Calendar spread/Horizontal spread
Bear spread
AON
26. 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).
Uncovered option/Naked option
Class of options
Theta
Equivalent strategy
27. The price that an owner of an option can purchase (call) or sell (put) the underlying stock.
Strike price
Put-call ratio
Pin risk
Time decay
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.
Assignment
Cash-settled American index options (cash index)
Short
In-the-money option (ITM)
29. 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.
reaking
Analytics
Theta
Conversion
30. A list of the options available for the underlying stock symbols in which you are interested.
Underlying
Option Chain
Covered option
Neutral strategy
31. Opening sale of a security.
Ask/ask price
Selling short
Debit spread
Rho
32. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.
Carry/Carrying charge
Horizontal spread
Time spread/Calendar spread/Horizontal spread
Butterfly spread
33. A short call position and a long put position.
Contract size
Synthetic short stock
Bull spread (call)
Hedging
34. The purchase or sale of an equal number of puts or calls with the same underlying - stike price - and expiration.
Delta
Straddle
All-or-none order (AON)
Interest
35. 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
Last trading day
Option
Synthetic short stock
36. 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
Historic volatility
Contract size
Vertical spread
GTC
37. 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
Neutral strategy
Covered call/Covered call writing
Credit spread
38. The time of day by which all exercise notices must be received on the expiration date.
American-style options
Covered option
Assigned
Expiration time
39. Fill-or-kill order
Debit spread
FOK
Synthetic short stock
Debit spread
40. A four-sided option spread that involves a long call and a short put at one strike price as well as a short call and a long put at another strike price. (buying 1 LMN Jan 50 call - and writing 1 LMN Jan 55 call; simultaneously buying 1 LMN Jan 55 put
European-style option
Box spread
Adjusted Option
Neutral
41. Charge levied for the privilege ofborrowing money
Interest
Out-of-the-money (OTM)
Expiration month
Early exercise
42. 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.
Synthetic short stock
In-the-money option (ITM)
Butterfly spread
Diagonal spread
43. Same as ask price
Carry/Carrying charge
Leg
Offer price
Bid/bid price
44. An individual with the opinion that a security - or the market in general will decline in price; someone having a negative or pessimistic outlook.
Bear
Intrinsic value
Options pricing curve
Short stock position
45. Amount by which an option is ITM.
Series of options
Butterfly spread (Call)
Intrinsic value
Long position
46. 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]
Cash-settled American index options (cash index)
Option
Time spread/Calendar spread/Horizontal spread
Expiration date
47. 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
Bull (or bullish) spread
Adjusted Option
AON
Good til cancel (GTC) order
48. The estimated value of an option derived from a mathematical model.
Black-Scholes formula
Bull spread (put)
Theoretical value (TV)
Indexing
49. A term describing one side of a spread position. A trader who legs into a spread establishes one side first - hoping for a favorable price movement so the other side can be executed at a better price.
Time value
Leg
Chicago Board Options Exchange (CBOE)
Calendar spread
50. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
LEAPS
Out-of-the-money (OTM)
Analytics
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