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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 lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
Ask/ask price
Implied volatility
Bear spread (put)
Last trading day
2. Amount by which an option is ITM.
Neutral
Intrinsic value
Credit spread
Spread
3. 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.
Expiration date
Leverage
Indexing
Black-Scholes formula
4. 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.
Ask/ask price
Black-Scholes formula
reaking
Assigned
5. 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
Spread
Fences
Synthetic Long call
At-the-money
6. 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
Series of options
Uncovered option/Naked option
Implied volatility
7. 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.
Collar
LEAPS
Arbitrage
Assigned
8. A position resulting from the sale of a contract or instrument that you do not own.
Gamma
Backspread
Short
Strangle
9. A long stock position and a long put position.
All-or-none order (AON)
Synthetic Long call
Implied volatility
Debit spread
10. 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.
Expiration time
Calendar spread
Synthetics
Credit spread
11. 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.
Theta
Short
Ratio write
Broker/Dealer
12. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.
Strangle
Edge
Short stock position
Backspread
13. A long stock position and a long put position.
Spread
Analytics
Synthetic Long call
All-or-none order (AON)
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.
Horizontal spread
Extrinsic value
FOK
AON
15. 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).
Edge
Bear spread (put)
Carry/Carrying charge
Equivalent strategy
16. 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.
Early exercise
Neutral strategy
All-or-none order (AON)
Combination
17. 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.
Covered option
Carry/Carrying charge
Black-Scholes formula
Good til cancel (GTC) order
18. A list of the options available for the underlying stock symbols in which you are interested.
Option Chain
Theoretical value (TV)
Intrinsic value
Synthetic long put
19. Charge levied for the privilege ofborrowing money
Horizontal spread
Premium
Interest
Arbitrage
20. A position that will perform best if there is little or no net change in the price of the underlying stock.
FOK
Synthetic short put
Clearinghouse
Neutral spread
21. A short stock position and a short put position.
Edge
Synthetic short call
Chicago Board Options Exchange (CBOE)
Condor spread
22. An option strategy that is neither bullish nor bearish.
Condor spread
European-style option
Neutral strategy
Option writer
23. 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).
Synthetics
Hedge/Hedged position
Interest rate risk
Leg
24. The time of day by which all exercise notices must be received on the expiration date.
Expiration cycle
Expiration time
Interest rate risk
Premium
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]
Synthetic short put
Time spread/Calendar spread/Horizontal spread
Options pricing model
Synthetics
26. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.
Arbitrage
Volatility
Expiration month
Neutral
27. The estimated value of an option derived from a mathematical model.
Long position
Theoretical value (TV)
Premium
Fill-or-kill order (FOK)
28. 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
Equivalent strategy
Out-of-the-money (OTM)
Bear spread
Butterfly spread
29. 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.
Straddle
Put-call ratio
Expiration date
Debit spread
30. 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]
Neutral
Expiration cycle
Time spread/Calendar spread/Horizontal spread
Indexing
31. 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.
American-style options
Synthetics
Automatic exercise
Options pricing curve
32. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.
Calendar spread
Option writer
Leg
Market on close (MOC)
33. Same as ask price
Extrinsic value
Offer price
Index
Option Chain
34. A prolonged period of falling prices. A bear market in stocks is usually brought on by the anticipation of declining economic activity.
Leg
Bear market
Good til cancel (GTC) order
Debit spread
35. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.
Ask/ask price
Arbitrage
Pin risk
Butterfly spread
36. 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.
Theta
Expiration
Good til cancel (GTC) order
Synthetics
37. Another name for calendar spread.
Good til cancel (GTC) order
Horizontal spread
Assignment
Index option
38. 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.
Expiration cycle
Black-Scholes formula
Bull
Broker/Dealer
39. 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.
Straddle
Open interest
Exercise
Bear spread (put)
40. An option that has no intrinsic value.
Put-call ratio
Chicago Board Options Exchange (CBOE)
Out-of-the-money (OTM)
Good til cancel (GTC) order
41. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
Adjusted Option
Index
Intrinsic value
Butterfly spread (Call)
42. An option that has no intrinsic value.
Chicago Board Options Exchange (CBOE)
Out-of-the-money (OTM)
Synthetic short put
Interest
43. An option that can be exercised only at expiration. Usually expire the third Friday of every month
GTC
Hedging
European-style option
Combination
44. 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)
Options pricing model
Bull
Vertical spread
Bear spread (put)
45. Commodity trading advisor.
Horizontal spread
Leg
CTA
Vertical spread
46. 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
Ratio write
Bull
Iron butterfly
Ratio write
47. 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.
Short
Put-call ratio
Index option
Option
48. A term referring to all options of the same type- either calls or puts- having the same underlying instrument.
LEAPS
Class of options
Hedge/Hedged position
Bear spread
49. A contract to buy or sell a predetermined Quantity of a commodity or financial product for a specific price on a given date.
Future
Contract size
Ask/ask price
Contract size
50. 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.
Option
AON
At-the-money
Collar