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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. 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.
Market on close (MOC)
Spread
Put-call ratio
Short stock position
2. 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)
Interest rate risk
Assignment
Out-of-the-money (OTM)
Bull spread (put)
3. A position resulting from the sale of a contract or instrument that you do not own.
Bid/bid price
Short
Index
Edge
4. An order to buy or sell at the last price on the close.
Fill-or-kill order (FOK)
Box spread
Market on close (MOC)
Expiration month
5. The sensitivity of an options theoretical value to a change in implied volatility.
Vega
Time value
Interest
Straddle
6. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
Broker/Dealer
Ask/ask price
Premium
Broker loan rate
7. 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.
American-style options
Expiration date
Bull (or bullish) spread
Spread
8. A type of order that requires that the order be executed completely or not at all.
Fill-or-kill order (FOK)
Intrinsic value
Short
Option writer
9. 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.
Synthetic short put
Combination
Rho
Fill-or-kill order (FOK)
10. An option that has intrinsic value
Short stock position
In-the-money option (ITM)
Neutral strategy
Fences
11. The estimated value of an option derived from a mathematical model.
Theoretical value (TV)
Bear
Bull
Uncovered option/Naked option
12. 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.
Hedging
Bear spread
Black-Scholes formula
Selling short
13. An order that is designated to be executed on or before the expiration date.
Option Chain
Long position
All-or-none order (AON)
Selling short
14. 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
Diagonal spread
Selling short
Spread
Fill-or-kill order (FOK)
15. Amount by which an option is ITM.
Bear spread
Conversion
Fences
Intrinsic value
16. A person who believes that a security - or the market in general - will rise in price; a positive or optimistic outlook.
Bull
Volatility
Synthetics
Strike price
17. A list of the options available for the underlying stock symbols in which you are interested.
Assignment
Analytics
Butterfly spread
Option Chain
18. The sensitivity (rate of change) of an option's theoretical value (assessed value) for a one dollar change in price of the underlying instrument. Expressed as a percentage - it represents an equivalent amount of underlying at a given moment in time.
Expiration
Delta
Early exercise
Bear
19. A spread in which the difference in the long and short options premiums results in a net debit.
Bull spread (put)
Reverse conversion
Ask/ask price
Debit spread
20. Options that may be exercised on or before the expiration date.
American-style options
Options pricing curve
Strangle
Future
21. 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
Market on close (MOC)
Equity option
Vega
Uncovered option/Naked option
22. The cycle of expiration dates used in short-term options trading. there are three cycles: (January - April - July - October; February - May - August - November; or March - June - September - December) Because options are traded in contracts for three
Expiration cycle
American-style options
Interest
Bear market
23. Calculations performed on updated prices.
Analytics
Ask/ask price
Delta
Expiration date
24. An agent who facilitates trades between a buyer and a seller and receives a commission for services.
Iron butterfly
LEAPS
Broker/Dealer
Butterfly spread (Call)
25. 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
Box spread
European-style option
Long position
Expiration month
26. 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)
Indexing
Credit spread
Bull spread (call)
Future
27. An option that can be exercised only at expiration. Usually expire the third Friday of every month
European-style option
Expiration time
Series of options
Volatility
28. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.
Good til cancel (GTC) order
Options pricing model
Neutral
Synthetic long stock
29. An option that can be exercised only at expiration. Usually expire the third Friday of every month
European-style option
Series of options
Exercise
In-the-money option (ITM)
30. Designated primary market maker.
DPM
Ask/ask price
Automatic exercise
Condor spread
31. A short call position and a long put position.
Equity option
Synthetic short stock
Exercise
FOK
32. 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
Broker loan rate
Collar
Synthetic short put
Fences
33. 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.
Expiration time
Black-Scholes formula
Rho
Bear spread (put)
34. The highest price a dealer is willing to pay for a security at a particular time.
Chicago Board Options Exchange (CBOE)
Bid/bid price
Expiration cycle
Horizontal spread
35. 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
Early exercise
Gamma
GTC
Backspread
36. The time of day by which all exercise notices must be received on the expiration date.
Call Option
Expiration time
In-the-money option (ITM)
Option writer
37. A list of the options available for the underlying stock symbols in which you are interested.
Option Chain
Neutral
Series of options
Analytics
38. 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.
Option Chain
Bull (or bullish) spread
Combination
Investment
39. An individual with the opinion that a security - or the market in general will decline in price; someone having a negative or pessimistic outlook.
Expiration time
Strike price
Bear
Index option
40. An agent who facilitates trades between a buyer and a seller and receives a commission for services.
Contract size
Broker/Dealer
Bull spread (put)
Time value
41. 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.
Interest rate risk
Ratio write
Diagonal spread
Long position
42. 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.
Early exercise
Fill-or-kill order (FOK)
Equivalent strategy
Leg
43. The total price of an option: intrinsic value plus extrinsic value
Premium
Bear
Synthetic Long call
Selling short
44. Received notification of an assignment by rhw options clearing corporation.
Class of options
Class of options
Assigned
Open interest
45. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.
Covered call/Covered call writing
Implied volatility
Option writer
Synthetic short call
46. 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
Spread
Market on close (MOC)
Neutral strategy
Short stock position
47. 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
Conversion
Vega
Automatic exercise
Collar
48. 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.
Theta
Covered option
Put-call ratio
Rho
49. 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.
Arbitrage
Option
Offer price
Option Chain
50. The stock price(s) at which an option strategy results in neither a profit nor a loss.
Break-even point(s)
Neutral
Reverse conversion
Expiration