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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. 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.
Bull spread (put)
Carry/Carrying charge
Equivalent strategy
Cash-settled American index options (cash index)
2. An option strategy that is neither bullish nor bearish.
Historic volatility
Calendar spread
Neutral strategy
DPM
3. 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]
Volatility
Bear
Time spread/Calendar spread/Horizontal spread
Expiration month
4. Amount by which an option is ITM.
Broker/Dealer
Extrinsic value
Intrinsic value
Option Chain
5. The largest and oldest listed options exchange.
Expiration
Chicago Board Options Exchange (CBOE)
Expiration month
Synthetic short call
6. 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
Iron butterfly
Synthetics
Theoretical value (TV)
Underlying
7. 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.
Chicago Board Options Exchange (CBOE)
Theta
Spread
Option writer
8. The total price of an option: intrinsic value plus extrinsic value
Premium
Expiration month
Uncovered option/Naked option
Option
9. A short stock position and a long call position.
Intrinsic value
Iron butterfly
Synthetic long put
Collar
10. An order that is designated to be executed on or before the expiration date.
All-or-none order (AON)
At-the-money
Index option
Bid/bid price
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.
ATM
Butterfly spread
Theoretical value (TV)
Delta
12. 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
FOK
Covered call/Covered call writing
Option writer
13. The difference in the premium prices of two options - where the credit premium of the one sold exceeds the debit premium of the one purchased. A bull spread with puts and a bear spread with calls are examples of credit spreads.
Assigned
Credit spread
Underlying
Butterfly spead (Put)
14. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.
Call Option
Synthetic long stock
Neutral
Interest rate risk
15. An option on shares of an individual common stock.
Edge
Equity option
Break-even point(s)
Adjusted Option
16. A strategy that profits from a stock price decline. It is initiated by borrowing stock from a broker -dealer and selling it in the open market. This strategy is closed (covered) at a later date by buying back the stock and turning it to the lending b
Bear market
Short stock position
Bear spread (call)
Future
17. Fill-or-kill order
Last trading day
Out-of-the-money (OTM)
Bear spread (put)
FOK
18. Procedure used by the options clearing corporation to exercise in-the-money options at expiration. (75 cents or more)
Assigned
Collar
Automatic exercise
Fences
19. 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)
Fill-or-kill order (FOK)
Bull spread (call)
Expiration month
Assignment
20. 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
GTC
European-style option
Iron butterfly
Index option
21. 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.
Conversion
Option Chain
Call Option
Option Chain
22. A position that will perform best if there is little or no net change in the price of the underlying stock.
Selling short
Last trading day
Neutral spread
Open interest
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
Option Chain
Debit spread
Hedge/Hedged position
Collar
24. An individual with the opinion that a security - or the market in general will decline in price; someone having a negative or pessimistic outlook.
Bear
Black-Scholes formula
Butterfly spread (Call)
Expiration
25. The total number of outstanding option contracts in a given series
Hedge/Hedged position
Open interest
In-the-money option (ITM)
Strike price
26. Received notification of an assignment by rhw options clearing corporation.
AON
Assigned
CTA
Synthetic short stock
27. The highest price a dealer is willing to pay for a security at a particular time.
Assignment
AON
Bid/bid price
Butterfly spread (Call)
28. A means of increasing return or worth without increasing investment.
LEAPS
Contract size
Leverage
Time spread/Calendar spread/Horizontal spread
29. A position resulting from the sale of a contract or instrument that you do not own.
Backspread
Synthetic long put
Short
Implied volatility
30. 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)
Intrinsic value
Covered call/Covered call writing
Synthetic short call
CTA
31. 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.
Butterfly spead (Put)
Combination
Options pricing curve
Backspread
32. A list of the options available for the underlying stock symbols in which you are interested.
Time decay
Box spread
Option Chain
Time value
33. The date an option contract becomes void.
Interest rate risk
At-the-money
Market on close (MOC)
Expiration
34. Charge levied for the privilege ofborrowing money
Combination
Indexing
Interest
Hedging
35. An investment strategy used by professional option traders in which a short put and long call with the same strike price and expiration are combined with short stock to lock in a price. (selling short 100 shares of XYZ stock - buying 1 XYZ May 60 cal
Synthetic long put
Time decay
Reverse conversion
Clearinghouse
36. Designated primary market maker.
DPM
Good til cancel (GTC) order
Bid/bid price
Collar
37. 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
Collar
Historic volatility
DPM
38. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.
Bull spread (call)
Options pricing curve
Exercise
Assignment
39. Designated primary market maker.
Ratio write
DPM
Volatility
Last trading day
40. 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)
Carry/Carrying charge
Ratio write
Leg
41. A long call position and a short put position.
Box spread
Strike price
Time decay
Synthetic long stock
42. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
Strike price
Option Chain
LEAPS
FOK
43. 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.
Hedge/Hedged position
Calendar spread
Clearinghouse
Hedging
44. An option strategy that is neither bullish nor bearish.
Butterfly spead (Put)
Automatic exercise
Neutral strategy
At-the-money
45. 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]
Extrinsic value
Time decay
Broker/Dealer
Time spread/Calendar spread/Horizontal spread
46. The sensitivity of theoretical option prices with regard to small changes in interest rates. Increases in interest rates lead to higher call values and lower put values. Lower interest rates do the opposite.
Rho
Equivalent strategy
Hedge/Hedged position
Out-of-the-money (OTM)
47. A measure of actual stock price changes over a specific period of time.
Historic volatility
Option
DPM
Cash-settled American index options (cash index)
48. The process by which the seller of an option is notified of the buyer's intention to exercise that option.
Condor spread
Butterfly spread (Call)
Assignment
Short stock position
49. The stock price(s) at which an option strategy results in neither a profit nor a loss.
Synthetic short put
Break-even point(s)
Covered option
Short stock position
50. 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
Delta
Broker loan rate
Expiration cycle
Assigned