SUBJECTS
|
BROWSE
|
CAREER CENTER
|
POPULAR
|
JOIN
|
LOGIN
Business Skills
|
Soft Skills
|
Basic Literacy
|
Certifications
About
|
Help
|
Privacy
|
Terms
|
Email
Search
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. 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.
Offer price
Rho
Vertical spread
Edge
2. A position that will perform best if there is little or no net change in the price of the underlying stock.
Neutral spread
Theoretical value (TV)
GTC
Iron butterfly
3. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
CTA
Expiration time
LEAPS
Bid/bid price
4. Opening sale of a security.
Historic volatility
Selling short
FOK
Covered option
5. A long stock position and a short call position.
Synthetic short put
Adjusted Option
Time spread/Calendar spread/Horizontal spread
European-style option
6. A type of order that requires that the order be executed completely or not at all.
Box spread
ATM
Ask/ask price
Fill-or-kill order (FOK)
7. 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)
Extrinsic value
Neutral
Covered option
8. A contract to buy or sell a predetermined Quantity of a commodity or financial product for a specific price on a given date.
Hedge/Hedged position
Debit spread
Future
Strangle
9. 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
Fill-or-kill order (FOK)
Box spread
Bid/bid price
Leverage
10. A means of increasing return or worth without increasing investment.
Index
Credit spread
Leverage
At-the-money
11. Amount by which an option is ITM.
Leverage
Intrinsic value
All-or-none order (AON)
Pin risk
12. Procedure used by the options clearing corporation to exercise in-the-money options at expiration. (75 cents or more)
Broker loan rate
Automatic exercise
Put-call ratio
Underlying
13. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
Index
Intrinsic value
All-or-none order (AON)
Short
14. The stock price(s) at which an option strategy results in neither a profit nor a loss.
Break-even point(s)
DPM
Delta
Time spread/Calendar spread/Horizontal spread
15. The number of underlying shares covered by one option contract. (100 shares for one equity option)
All-or-none order (AON)
Time value
Contract size
Calendar spread
16. 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.
Neutral strategy
Chicago Board Options Exchange (CBOE)
Extrinsic value
Strangle
17. 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
Reverse conversion
Cash-settled American index options (cash index)
Broker loan rate
Historic volatility
18. Third Friday of expiration month
American-style options
Bull
Last trading day
Delta
19. 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).
Hedge/Hedged position
Bull
Long position
Equivalent strategy
20. 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.
Expiration time
Option Chain
Synthetic long put
Volatility
21. 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
Equity option
Bear spread
Analytics
Class of options
22. An order to buy or sell a security that will remain in effect until the order is executed or canceled
Good til cancel (GTC) order
Last trading day
Fences
Calendar spread
23. 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)
Leg
Clearinghouse
Butterfly spread
Bull spread (put)
24. 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.
Ratio write
Reverse conversion
AON
Synthetics
25. 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)
Credit spread
Neutral spread
Options pricing model
Strike price
26. The total number of outstanding option contracts in a given series
Early exercise
Synthetic long put
Open interest
Covered option
27. A strategy consisting of at least two components transacted simultaneously. The price relationship between each part - or 'leg -' could change based on a move in underlying price and or volatility. A spread is entered into with the expectation of eit
Offer price
Spread
Diagonal spread
Butterfly spead (Put)
28. 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)
Break-even point(s)
Debit spread
Bear market
29. An order that is designated to be executed on or before the expiration date. (all or none)
Ratio write
At-the-money
AON
Rho
30. 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.
Expiration time
Neutral
Strike price
Put-call ratio
31. The use of money to create more money through an appreciating or income-producing asset.
Interest rate risk
European-style option
Investment
Clearinghouse
32. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.
Straddle
Equity option
Bull (or bullish) spread
Implied volatility
33. An option that has no intrinsic value.
Bull spread (call)
Contract size
Expiration
Out-of-the-money (OTM)
34. An order to buy or sell at the last price on the close.
Black-Scholes formula
Selling short
Option Chain
Market on close (MOC)
35. A term referring to all options of the same type- either calls or puts- having the same underlying instrument.
Ratio write
Long position
Covered call/Covered call writing
Class of options
36. An option whose exercise price is equal to the current market price of the underlying security. An ATM option may or may not have intrinsic value.
Synthetic Long call
Gamma
Fill-or-kill order (FOK)
At-the-money
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
Conversion
Debit spread
Bear
Last trading day
38. 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.
Extrinsic value
Ratio write
Synthetics
Investment
39. 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.
Bear market
Bear
Bear spread (call)
Ratio write
40. The time of day by which all exercise notices must be received on the expiration date.
LEAPS
Early exercise
Implied volatility
Expiration time
41. The price that an owner of an option can purchase (call) or sell (put) the underlying stock.
Open interest
Series of options
American-style options
Strike price
42. The highest price a dealer is willing to pay for a security at a particular time.
Bid/bid price
Time decay
Premium
Backspread
43. 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.
Delta
Bear
Ratio write
Time decay
44. An option strategy that is neither bullish nor bearish.
Debit spread
GTC
Neutral strategy
Interest
45. The total number of outstanding option contracts in a given series
Interest rate risk
Open interest
Bid/bid price
Delta
46. The purchase or sale of an equal number of puts or calls with the same underlying - stike price - and expiration.
Straddle
Black-Scholes formula
Delta
Bid/bid price
47. Calculations performed on updated prices.
Good til cancel (GTC) order
Iron butterfly
Analytics
Market on close (MOC)
48. A short call position and a long put position.
Contract size
Credit spread
Synthetic short stock
Assignment
49. 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]
Options pricing curve
Call Option
Time spread/Calendar spread/Horizontal spread
Expiration month
50. An option whose underlying asset is an index.
All-or-none order (AON)
Bid/bid price
Time spread/Calendar spread/Horizontal spread
Index option