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Options Trading

Instructions:
  • Answer 50 questions in 15 minutes.
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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. 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.






2. A contract to buy or sell a predetermined Quantity of a commodity or financial product for a specific price on a given date.






3. An option that can be exercised only at expiration. Usually expire the third Friday of every month






4. A measure of actual stock price changes over a specific period of time.






5. 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.






6. 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.






7. 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)






8. At the money






9. 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)






10. At the money






11. An option whose underlying asset is an index.






12. Fill-or-kill order






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






14. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.






15. Interest rate at which brokerage firms borrow from banks to finance their clients' security positions. The call loan rate is sometimes used because the loans can be called on a 24-hour notice.






16. 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.






17. An option that has intrinsic value






18. 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.






19. An option that can be exercised only at expiration. Usually expire the third Friday of every month






20. A long call position and a short put position.






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






22. 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






23. 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






24. A list of the options available for the underlying stock symbols in which you are interested.






25. 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]






26. Investment strategy that has a similar risk/reward profile as another investment strategy. (a long May 60-65 call vertical spread is equivalent to a short May 60-65 put vertical spread).






27. The price that an owner of an option can purchase (call) or sell (put) the underlying stock.






28. 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.






29. The sensitivity of theoretical option prices with regard to small changes in time. Theta measures the rate of decay in the time value of options.






30. A list of the options available for the underlying stock symbols in which you are interested.






31. Opening sale of a security.






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.






33. A short call position and a long put position.






34. The purchase or sale of an equal number of puts or calls with the same underlying - stike price - and expiration.






35. A a feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.






36. 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






37. The simultaneous purchase and sale of options of the same class (call or put - having same underlying) at the same strike prices - but with different expiration dates - selling the short-term option and buying the long-term option.






38. The time of day by which all exercise notices must be received on the expiration date.






39. Fill-or-kill order






40. 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






41. Charge levied for the privilege ofborrowing money






42. The combination of a vertical and a calendar spread - wherein the investor buys and sells options of the same class at different expiration dates and different strike prices.






43. Same as ask price






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






45. Amount by which an option is ITM.






46. 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]






47. 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






48. The estimated value of an option derived from a mathematical model.






49. 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.






50. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.






Can you answer 50 questions in 15 minutes?



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