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Options Trading

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.






2. Charge levied for the privilege ofborrowing money






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]






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






5. Procedure used by the options clearing corporation to exercise in-the-money options at expiration. (75 cents or more)






6. The largest and oldest listed options exchange.






7. The sensitivity of an options theoretical value to a change in implied volatility.






8. Term used to describe how the theoretical value of an option 'erodes' or reduces with the passage of time. Time decay is specifically quantified by Theta.






9. An agent who facilitates trades between a buyer and a seller and receives a commission for services.






10. The largest and oldest listed options exchange.






11. 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.






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






13. 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.






14. 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.






15. Commodity trading advisor.






16. Good Til Cancel






17. The risk that a change in the interest rates will negatively affect the value of an investor's holdings; generally associated with bonds - but applying to all investments






18. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.






19. 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]






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






21. 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.






22. 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.






23. An order that is designated to be executed on or before the expiration date.






24. The interest expense on money borrowed to finance a margined securities position.






25. An investment strategy in which a long put and a short call with the same strike price and expiration are combined with long stock to lock in a nearly risk-less profit. (by purchasing 100 shares of XYZ stock at 50 - writing 1 XYZ Jan 50 call - and bu






26. Opening sale of a security.






27. 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.






28. 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.






29. An option whose exercise price is equal to the current market price of the underlying security. An ATM option may or may not have intrinsic value.






30. 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.






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






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






33. Commodity trading advisor.






34. 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






35. 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






36. An option on shares of an individual common stock.






37. 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






38. A debit spread in which a decline in the price of the underlying security will theoretically increase the value of the spread. (writing 1 XYZ Jan 50 put and buying 1 XYZ Jan 55 put)






39. The month during which the expiration date occurs






40. 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






41. A spread in which the difference in the long and short options premiums results in a net debit.






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






43. 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






44. 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.






45. Calculations performed on updated prices.






46. 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






47. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).






48. Fill-or-kill order






49. The sensitivity of an options theoretical value to a change in implied volatility.






50. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.