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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. A prolonged period of falling prices. A bear market in stocks is usually brought on by the anticipation of declining economic activity.
Ratio write
Bear market
Selling short
Volatility
2. 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)
Call Option
Options pricing curve
Expiration time
Adjusted Option
3. A strategy involving four options and four strike prices - and that has both limited risk and limited profit potential. A long call condor spread is establish by buying one call the lowest strike - writing one call at the second strike - writing anot
Condor spread
Clearinghouse
Exercise
Good til cancel (GTC) order
4. Calculations performed on updated prices.
Expiration date
Credit spread
Analytics
Theta
5. An investment strategy that attempts to lower risk by buying securities that have offsetting risk characteristics. A perfect hedge eliminates risk entirely. Hedging strategies lower the return because there is a cost involved in reducing risk.
Hedging
Expiration month
Bull
Delta
6. 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
Backspread
Bull (or bullish) spread
Call Option
Uncovered option/Naked option
7. A position that will perform best if there is little or no net change in the price of the underlying stock.
Strike price
Neutral spread
Equivalent strategy
Leg
8. 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.
Time spread/Calendar spread/Horizontal spread
Backspread
Assigned
European-style option
9. An option strategy with limited risk and limited profit potential that involves both a long(or short) straddle - and a short (or long) strangle. (short strangle: buying 1 ABC May 90 call and 1 ABC May 90 put - and writing 1 ABC May 95 call and writin
Condor spread
American-style options
Iron butterfly
Theoretical value (TV)
10. The use of money to create more money through an appreciating or income-producing asset.
Investment
Index
Hedging
Out-of-the-money (OTM)
11. 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
Reverse conversion
Gamma
Synthetic long stock
Bear market
12. Commodity trading advisor.
Synthetic short call
Bear
Bear spread
CTA
13. 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.
Carry/Carrying charge
Covered call/Covered call writing
Broker loan rate
At-the-money
14. Third Friday of expiration month
Uncovered option/Naked option
Delta
Leverage
Last trading day
15. Amount by which an option is ITM.
Horizontal spread
reaking
Intrinsic value
Bull (or bullish) spread
16. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.
Put-call ratio
Credit spread
Black-Scholes formula
Option writer
17. The time of day by which all exercise notices must be received on the expiration date.
Expiration cycle
Expiration time
Volatility
Exercise
18. A long stock position and a short call position.
Option Chain
Leg
Synthetic short put
Uncovered option/Naked option
19. 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.
Selling short
Combination
Collar
Bid/bid price
20. 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.
Ask/ask price
Exercise
In-the-money option (ITM)
Option
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
Bear spread
Fill-or-kill order (FOK)
Expiration cycle
Bear spread (call)
22. 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
Delta
DPM
Conversion
Bull spread (call)
23. 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.
Time value
Uncovered option/Naked option
Black-Scholes formula
Automatic exercise
24. 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.
Hedge/Hedged position
Debit spread
Class of options
Exercise
25. 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)
Short
Open interest
Bull spread (put)
Spread
26. The month during which the expiration date occurs
Expiration month
Butterfly spread
AON
Extrinsic value
27. 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
Collar
Selling short
Expiration cycle
Pin risk
28. 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)
Bear spread (call)
Gamma
Premium
In-the-money option (ITM)
29. 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
Bull spread (call)
Open interest
Box spread
Short stock position
30. 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.
Credit spread
Future
Expiration date
Long position
31. 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)
Box spread
Vertical spread
Options pricing model
Neutral spread
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.
Last trading day
Break-even point(s)
Butterfly spread
In-the-money option (ITM)
33. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.
Butterfly spread
Strangle
Fences
Broker/Dealer
34. An order to buy or sell a security that will remain in effect until the order is executed or canceled
Interest rate risk
Ratio write
Good til cancel (GTC) order
Condor spread
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).
Synthetic short stock
Bear
Hedge/Hedged position
Synthetic long put
36. A means of increasing return or worth without increasing investment.
Selling short
Condor spread
Leverage
Bear spread (put)
37. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
LEAPS
Intrinsic value
Iron butterfly
Theta
38. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
Extrinsic value
Neutral spread
American-style options
LEAPS
39. An option whose underlying asset is an index.
Index option
Butterfly spread (Call)
Investment
Time value
40. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.
Open interest
CTA
Contract size
Implied volatility
41. 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.
Option Chain
Call Option
DPM
Volatility
42. A long stock position and a long put position.
Interest
Offer price
Synthetic Long call
Credit spread
43. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
Collar
Series of options
Ask/ask price
Adjusted Option
44. 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.
All-or-none order (AON)
Leverage
Selling short
Black-Scholes formula
45. The highest price a dealer is willing to pay for a security at a particular time.
Covered call/Covered call writing
Bid/bid price
Strike price
Bear spread
46. 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
Adjusted Option
Neutral strategy
Arbitrage
47. 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.
Cash-settled American index options (cash index)
Bull spread (call)
Box spread
Synthetics
48. The sensitivity of an options theoretical value to a change in implied volatility.
Vega
Exercise
Combination
Synthetic Long call
49. A measure of actual stock price changes over a specific period of time.
Series of options
Historic volatility
Indexing
Bull spread (put)
50. 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
Gamma
Short stock position
Exercise
Intrinsic value
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