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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 part of an options total price that exceeds its intrinsic value. Price of an out-of-money option consists entirely of time value.
Time value
Ask/ask price
Future
Out-of-the-money (OTM)
2. An order that is designated to be executed on or before the expiration date. (all or none)
AON
Reverse conversion
Broker loan rate
Underlying
3. Procedure used by the options clearing corporation to exercise in-the-money options at expiration. (75 cents or more)
Extrinsic value
Uncovered option/Naked option
Intrinsic value
Automatic exercise
4. Commodity trading advisor.
LEAPS
CTA
Box spread
Butterfly spread (Call)
5. Amount by which an option is ITM.
Last trading day
Strike price
Offer price
Intrinsic value
6. The largest and oldest listed options exchange.
Extrinsic value
Covered call/Covered call writing
Chicago Board Options Exchange (CBOE)
Synthetic short put
7. 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
Gamma
Fences
Equivalent strategy
Index
8. A position resulting from the sale of a contract or instrument that you do not own.
Short
Neutral spread
Fences
Neutral
9. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
Bull spread (call)
Index
Synthetic short put
DPM
10. 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
Collar
Investment
Leverage
Butterfly spread (Call)
11. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.
Gamma
Butterfly spread
Box spread
In-the-money option (ITM)
12. An option strategy that is neither bullish nor bearish.
Options pricing curve
Break-even point(s)
Reverse conversion
Neutral strategy
13. 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
Butterfly spread (Call)
Short stock position
LEAPS
14. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
Strangle
Premium
Credit spread
Index
15. A long put butterfly is established by buying one put at the lowest strike price - writing two puts at the middle strike price - and buying one put at the highest strike price.
Offer price
DPM
Bear
Butterfly spead (Put)
16. 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.
Delta
Bear spread
Options pricing curve
Intrinsic value
17. 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.
Equivalent strategy
Future
Edge
Carry/Carrying charge
18. An order that is designated to be executed on or before the expiration date.
Early exercise
Broker loan rate
Class of options
All-or-none order (AON)
19. 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.
Hedging
Uncovered option/Naked option
Backspread
Bear spread (call)
20. 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)
Bull spread (put)
Good til cancel (GTC) order
AON
Assigned
21. Opening sale of a security.
Expiration time
Selling short
Long position
In-the-money option (ITM)
22. 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.
Black-Scholes formula
Out-of-the-money (OTM)
Interest
Put-call ratio
23. The number of underlying shares covered by one option contract. (100 shares for one equity option)
Equivalent strategy
Pin risk
Rho
Contract size
24. An option strategy in which call options are sold against equivalent amounts of long stock. ( writing 2XYZ Jan 50 calls while owning 200 shares of XYZ stock)
Covered call/Covered call writing
Credit spread
Chicago Board Options Exchange (CBOE)
Expiration time
25. 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.
reaking
Broker loan rate
ATM
Long position
26. A type of order that requires that the order be executed completely or not at all.
Neutral strategy
Fill-or-kill order (FOK)
Automatic exercise
Index
27. 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
Diagonal spread
Backspread
Bear
28. The use of money to create more money through an appreciating or income-producing asset.
Indexing
Investment
CTA
Time decay
29. An option that can be exercised only at expiration. Usually expire the third Friday of every month
Uncovered option/Naked option
Assigned
European-style option
Theta
30. 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.
Black-Scholes formula
Butterfly spread
Bull spread (call)
Synthetics
31. An order to buy or sell at the last price on the close.
Market on close (MOC)
Covered option
Long position
Short stock position
32. The total price of an option: intrinsic value plus extrinsic value
Strangle
DPM
Bear spread (put)
Premium
33. A term referring to all options of the same type- either calls or puts- having the same underlying instrument.
Class of options
Underlying
Future
At-the-money
34. An agent who facilitates trades between a buyer and a seller and receives a commission for services.
Put-call ratio
Synthetic long stock
Iron butterfly
Broker/Dealer
35. A means of increasing return or worth without increasing investment.
Automatic exercise
European-style option
Leverage
Extrinsic value
36. 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.
Hedging
Leg
Premium
Box spread
37. 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.
Delta
Option writer
Butterfly spread
Uncovered option/Naked option
38. An option strategy that is neither bullish nor bearish.
Investment
Neutral strategy
CTA
Premium
39. A short stock position and a short put position.
Synthetic short call
Rho
Selling short
Neutral
40. 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
Rho
At-the-money
Backspread
Expiration cycle
41. Calculations performed on updated prices.
Long position
Combination
Market on close (MOC)
Analytics
42. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.
Butterfly spread
Neutral spread
Rho
Condor spread
43. A short stock position and a long call position.
Expiration month
Extrinsic value
Synthetics
Synthetic long put
44. Received notification of an assignment by rhw options clearing corporation.
Butterfly spread (Call)
Index
Iron butterfly
Assigned
45. An option on shares of an individual common stock.
Underlying
Assignment
Time decay
Equity option
46. An investment strategy in which stock is purchased and call options are written on a greater than one-for-one basis.More calls written than the equivalent number of shares purchased.
All-or-none order (AON)
Automatic exercise
Ratio write
Spread
47. 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
Spread
Assignment
Bid/bid price
Expiration time
48. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.
Implied volatility
Broker loan rate
CTA
Offer price
49. Same as ask price
Bear
Volatility
Bid/bid price
Offer price
50. Opening sale of a security.
Selling short
Synthetic short call
ATM
Bear