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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. Good Til Cancel
Theoretical value (TV)
Call Option
GTC
Market on close (MOC)
2. The sensitivity of an option's delta at a given moment in time. It is the change in delta with respect to a 1-point change in the underlying. Examplee (let's say a call option with a 100 strike price has a 50 delta. If the underlying moves from 100 t
Conversion
Analytics
Gamma
Call Option
3. A position resulting from the sale of a contract or instrument that you do not own.
Horizontal spread
Short
Box spread
Time decay
4. Designated primary market maker.
Hedge/Hedged position
Neutral
DPM
FOK
5. 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)
Time value
Bull spread (call)
Time spread/Calendar spread/Horizontal spread
Debit spread
6. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
Uncovered option/Naked option
Series of options
Ask/ask price
Covered option
7. An option whose underlying asset is an index.
Gamma
Diagonal spread
Expiration time
Index option
8. 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)
Options pricing model
Debit spread
Bear spread (put)
Contract size
9. Third Friday of expiration month
Last trading day
Expiration month
American-style options
Synthetic Long call
10. A credit spread in which a decline in the price of the underlying security will theoretically increase the value of the spread. (buying 1 XYZ Jan 55 call and writing 1 XYZ Jan 50 call)
Open interest
Bear spread (call)
Bear market
Option writer
11. An option that has intrinsic value
Butterfly spread (Call)
Bear market
In-the-money option (ITM)
Expiration
12. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
Selling short
Index
Equivalent strategy
Series of options
13. 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.
Bull spread (put)
Edge
Selling short
Equity option
14. 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.
Box spread
Edge
Extrinsic value
Strangle
15. An option that has no intrinsic value.
Credit spread
Out-of-the-money (OTM)
Straddle
Time decay
16. 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).
Rho
Theoretical value (TV)
Spread
Hedge/Hedged position
17. Process by which the holder of an option notifies the seller of intention to take delivery of the underlying in the case of a call - or make delivery in the case of a put - at the specified exercise price.
Covered call/Covered call writing
Exercise
Backspread
Time spread/Calendar spread/Horizontal spread
18. An agent who facilitates trades between a buyer and a seller and receives a commission for services.
Hedge/Hedged position
Uncovered option/Naked option
Broker/Dealer
Time spread/Calendar spread/Horizontal spread
19. Opening sale of a security.
Fences
Gamma
Selling short
Ratio write
20. An order to buy or sell a security that will remain in effect until the order is executed or canceled
Covered call/Covered call writing
Good til cancel (GTC) order
DPM
Horizontal spread
21. A position that will perform best if there is little or no net change in the price of the underlying stock.
Combination
In-the-money option (ITM)
Neutral spread
Covered call/Covered call writing
22. 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
Bull spread (call)
Credit spread
Box spread
Reverse conversion
23. 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.
Broker/Dealer
Contract size
Iron butterfly
At-the-money
24. 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
Bear spread
Equivalent strategy
Intrinsic value
Vertical spread
25. 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.
Black-Scholes formula
AON
Adjusted Option
Rho
26. Designated primary market maker.
Time spread/Calendar spread/Horizontal spread
Indexing
Premium
DPM
27. The stock price(s) at which an option strategy results in neither a profit nor a loss.
Strike price
Break-even point(s)
Options pricing model
Broker/Dealer
28. An option that can be exercised only at expiration. Usually expire the third Friday of every month
Bear market
European-style option
Future
Time spread/Calendar spread/Horizontal spread
29. The total number of outstanding option contracts in a given series
Selling short
Strike price
Open interest
Synthetic long stock
30. The time of day by which all exercise notices must be received on the expiration date.
Theta
Expiration time
Call Option
Horizontal spread
31. A list of the options available for the underlying stock symbols in which you are interested.
European-style option
Condor spread
Option Chain
Calendar spread
32. An order that is designated to be executed on or before the expiration date. (all or none)
Option
Future
AON
American-style options
33. Same as ask price
Automatic exercise
Synthetic short stock
Offer price
Volatility
34. 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.
Chicago Board Options Exchange (CBOE)
Straddle
Put-call ratio
Ratio write
35. Received notification of an assignment by rhw options clearing corporation.
Bear spread
Time decay
Condor spread
Assigned
36. Procedure used by the options clearing corporation to exercise in-the-money options at expiration. (75 cents or more)
Expiration
Expiration month
Arbitrage
Automatic exercise
37. 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.
Ratio write
Spread
Backspread
Time value
38. A measure of actual stock price changes over a specific period of time.
Bear market
Horizontal spread
Historic volatility
Box spread
39. A measure of actual stock price changes over a specific period of time.
Historic volatility
American-style options
Interest
Option
40. 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)
In-the-money option (ITM)
Horizontal spread
Clearinghouse
Adjusted Option
41. 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)
Pin risk
Theoretical value (TV)
Intrinsic value
Covered option
42. 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
Underlying
Index
Options pricing curve
Uncovered option/Naked option
43. 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
Bear spread (put)
Time value
Expiration time
Bull (or bullish) spread
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.
Black-Scholes formula
Indexing
Diagonal spread
Cash-settled American index options (cash index)
45. The date an option contract becomes void.
Automatic exercise
Expiration
Selling short
Equity option
46. A means of increasing return or worth without increasing investment.
Leverage
Option writer
Synthetic Long call
Covered call/Covered call writing
47. A spread in which the difference in the long and short options premiums results in a net debit.
Vertical spread
Automatic exercise
Iron butterfly
Debit spread
48. 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)
Vega
Backspread
Bear spread (put)
Adjusted Option
49. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.
Neutral
Expiration cycle
Indexing
Indexing
50. 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.
Adjusted Option
ATM
Black-Scholes formula
Indexing