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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. Received notification of an assignment by rhw options clearing corporation.
Selling short
Bear spread
Assigned
Break-even point(s)
2. Charge levied for the privilege ofborrowing money
Interest
Expiration cycle
Theoretical value (TV)
Early exercise
3. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
Vertical spread
LEAPS
American-style options
Vega
4. 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.
Spread
Option
Hedging
Diagonal spread
5. 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)
Box spread
Bid/bid price
Series of options
Bull spread (call)
6. An order to buy or sell at the last price on the close.
ATM
Market on close (MOC)
Condor spread
Break-even point(s)
7. The purchase or sale of an equal number of puts or calls with the same underlying - stike price - and expiration.
At-the-money
Bear spread (put)
Straddle
Assigned
8. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.
Bear spread
Short
Neutral
Fill-or-kill order (FOK)
9. An order that is designated to be executed on or before the expiration date.
Short stock position
Broker/Dealer
Exercise
All-or-none order (AON)
10. An order to buy or sell a security that will remain in effect until the order is executed or canceled
Long position
Leverage
Good til cancel (GTC) order
Broker/Dealer
11. An option that has no intrinsic value.
Synthetic short put
Out-of-the-money (OTM)
Reverse conversion
reaking
12. 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.
Bear spread (call)
Implied volatility
Fences
Option
13. The highest price a dealer is willing to pay for a security at a particular time.
Bid/bid price
Assignment
Covered call/Covered call writing
Bear spread (call)
14. 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
Diagonal spread
Interest
Call Option
15. 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)
Butterfly spead (Put)
Bear
Pin risk
Assignment
16. A contract between a buyer and seller whereby the buyer acquires the right - but not the obligation - to buy a specified underlying instrument at a fixed price on or before a specified date.
Volatility
Collar
Call Option
ATM
17. 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.
Pin risk
Call Option
Synthetic Long call
Delta
18. A spread in which the difference in the long and short options premiums results in a net debit.
Options pricing curve
Box spread
Expiration
Debit spread
19. 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.
Theoretical value (TV)
Ratio write
Automatic exercise
Leg
20. Fill-or-kill order
Index
Series of options
FOK
Options pricing curve
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
Clearinghouse
Historic volatility
Bear spread
Bid/bid price
22. An option strategy that is neither bullish nor bearish.
Time spread/Calendar spread/Horizontal spread
Bid/bid price
Neutral strategy
Expiration cycle
23. A short option position that is not fully collateralized if notification of assignment is received. A short call position is uncovered if the writer does not have a long stock or long call position. A short put is naked if the writer is not short sto
Options pricing curve
Backspread
Uncovered option/Naked option
Intrinsic value
24. 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.
Indexing
Debit spread
Call Option
Long position
25. Options that may be exercised on or before the expiration date.
American-style options
Ask/ask price
Market on close (MOC)
Interest rate risk
26. 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.
Diagonal spread
Time spread/Calendar spread/Horizontal spread
Bull spread (call)
All-or-none order (AON)
27. A position that will perform best if there is little or no net change in the price of the underlying stock.
Neutral spread
Bull spread (call)
Time value
Volatility
28. 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
Delta
Equivalent strategy
CTA
Box spread
29. A short call position and a long put position.
Cash-settled American index options (cash index)
At-the-money
GTC
Synthetic short stock
30. The number of underlying shares covered by one option contract. (100 shares for one equity option)
Chicago Board Options Exchange (CBOE)
Out-of-the-money (OTM)
Butterfly spread
Contract size
31. An order that is designated to be executed on or before the expiration date. (all or none)
Option writer
Put-call ratio
Options pricing curve
AON
32. A a feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.
Neutral
Class of options
Calendar spread
Early exercise
33. The total number of outstanding option contracts in a given series
Open interest
Bid/bid price
Vega
Synthetic short stock
34. 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)
Fill-or-kill order (FOK)
Vega
Adjusted Option
Implied volatility
35. 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)
Combination
Covered call/Covered call writing
Investment
Reverse conversion
36. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.
Uncovered option/Naked option
Implied volatility
Index
Time value
37. 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)
Index
Option Chain
Strike price
38. A type of order that requires that the order be executed completely or not at all.
reaking
Future
Fences
Fill-or-kill order (FOK)
39. 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)
Adjusted Option
Bull
European-style option
Assigned
40. 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
Last trading day
Debit spread
41. A person who believes that a security - or the market in general - will rise in price; a positive or optimistic outlook.
Analytics
Synthetic Long call
Out-of-the-money (OTM)
Bull
42. A list of the options available for the underlying stock symbols in which you are interested.
Gamma
Option Chain
Broker/Dealer
Butterfly spread
43. An option that has no intrinsic value.
Options pricing model
Vertical spread
Out-of-the-money (OTM)
Covered call/Covered call writing
44. A long stock position and a short call position.
Diagonal spread
Leg
Synthetic short put
Long position
45. A contract to buy or sell a predetermined Quantity of a commodity or financial product for a specific price on a given date.
Future
Debit spread
Last trading day
Option
46. An order to buy or sell at the last price on the close.
Break-even point(s)
Covered option
Uncovered option/Naked option
Market on close (MOC)
47. A facility that compares and reconciles both sides of a trade in addition to receiving and delivering payments and securities.
Last trading day
Clearinghouse
Interest
Expiration date
48. The instrument (stock - future - or cash index) to be delivered when an option is exercised.
Volatility
Strangle
Underlying
Synthetic Long call
49. The sensitivity of an options theoretical value to a change in implied volatility.
Options pricing curve
Fill-or-kill order (FOK)
Vega
Assignment
50. A short call position and a long put position.
Credit spread
Synthetic short stock
Bull spread (call)
Premium