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Options Trading

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. Options that may be exercised on or before the expiration date.






2. A type of order that requires that the order be executed completely or not at all.






3. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.






4. The highest price a dealer is willing to pay for a security at a particular time.






5. 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)






6. The date an option contract becomes void.






7. An individual with the opinion that a security - or the market in general will decline in price; someone having a negative or pessimistic outlook.






8. 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






9. Opening sale of a security.






10. Received notification of an assignment by rhw options clearing corporation.






11. 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.






12. Third Friday of expiration month






13. A position resulting from the sale of a contract or instrument that you do not own.






14. 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.






15. 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






16. The total number of outstanding option contracts in a given series






17. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.






18. The use of money to create more money through an appreciating or income-producing asset.






19. 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






20. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).






21. Another name for calendar spread.






22. 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.






23. An agent who facilitates trades between a buyer and a seller and receives a commission for services.






24. Amount by which an option is ITM.






25. A market drop in the price of a security






26. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.






27. An order that is designated to be executed on or before the expiration date. (all or none)






28. Fill-or-kill order






29. The total price of an option: intrinsic value plus extrinsic value






30. 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)






31. An order that is designated to be executed on or before the expiration date. (all or none)






32. 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






33. 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.






34. The process by which the seller of an option is notified of the buyer's intention to exercise that option.






35. An option that has intrinsic value






36. 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.






37. 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.






38. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.






39. Designated primary market maker.






40. 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.






41. 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.






42. The process by which the seller of an option is notified of the buyer's intention to exercise that option.






43. 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.






44. 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.






45. 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.






46. The sensitivity of an options theoretical value to a change in implied volatility.






47. Calculations performed on updated prices.






48. A short stock position and a long call position.






49. A long stock position and a long put position.






50. Good Til Cancel






Can you answer 50 questions in 15 minutes?



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