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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. A position resulting from the sale of a contract or instrument that you do not own.
Index option
Conversion
Short
Bull
2. 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
Expiration
FOK
Bear spread
Fences
3. 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
Ask/ask price
Edge
DPM
Gamma
4. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
Calendar spread
Out-of-the-money (OTM)
Neutral strategy
LEAPS
5. The number of underlying shares covered by one option contract. (100 shares for one equity option)
Contract size
Iron butterfly
Indexing
Expiration month
6. A long stock position and a short call position.
Butterfly spread
Synthetic short put
Carry/Carrying charge
Hedging
7. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.
Equivalent strategy
Neutral
reaking
Historic volatility
8. An option that has intrinsic value
Vertical spread
Ask/ask price
In-the-money option (ITM)
Pin risk
9. A means of increasing return or worth without increasing investment.
Leverage
Options pricing curve
Series of options
Bull
10. 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
Open interest
Bear
Condor spread
At-the-money
11. 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.
Series of options
Index
Bull spread (put)
Backspread
12. The instrument (stock - future - or cash index) to be delivered when an option is exercised.
Contract size
Synthetic short stock
Time spread/Calendar spread/Horizontal spread
Underlying
13. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
Bid/bid price
Series of options
All-or-none order (AON)
Bull spread (call)
14. The stock price(s) at which an option strategy results in neither a profit nor a loss.
Horizontal spread
Investment
Break-even point(s)
reaking
15. An option whose underlying asset is an index.
Market on close (MOC)
Debit spread
Index option
Delta
16. 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.
Credit spread
Expiration time
Option
Analytics
17. An order to buy or sell at the last price on the close.
Clearinghouse
Bull spread (put)
Butterfly spread (Call)
Market on close (MOC)
18. A short stock position and a short put position.
Bear spread (put)
Synthetic short call
Reverse conversion
Synthetic short stock
19. The date an option contract becomes void.
Selling short
Expiration
Clearinghouse
Bear
20. 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.
AON
Premium
Clearinghouse
Long position
21. The date an option contract becomes void.
Box spread
Ratio write
Expiration
Chicago Board Options Exchange (CBOE)
22. An option on shares of an individual common stock.
Last trading day
Expiration time
Automatic exercise
Equity option
23. A long call position and a short put position.
Covered call/Covered call writing
Market on close (MOC)
Expiration date
Synthetic long stock
24. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
Contract size
Condor spread
Theta
LEAPS
25. 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)
AON
Time spread/Calendar spread/Horizontal spread
Iron butterfly
26. The total number of outstanding option contracts in a given series
Good til cancel (GTC) order
Open interest
Theta
Expiration
27. 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.
Calendar spread
Vertical spread
Equity option
Ratio write
28. 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
Assigned
Time decay
Credit spread
29. Another name for calendar spread.
Covered call/Covered call writing
Horizontal spread
Reverse conversion
Vertical spread
30. The interest expense on money borrowed to finance a margined securities position.
Conversion
Straddle
Carry/Carrying charge
Analytics
31. A long stock position and a long put position.
Synthetic Long call
Debit spread
Early exercise
Equivalent strategy
32. Opening sale of a security.
Vertical spread
Carry/Carrying charge
Strangle
Selling short
33. The interest expense on money borrowed to finance a margined securities position.
Butterfly spread
Straddle
Carry/Carrying charge
Combination
34. 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)
Series of options
Iron butterfly
Bull spread (call)
Contract size
35. 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
Diagonal spread
Iron butterfly
Call Option
Leverage
36. 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
Theta
Vega
Horizontal spread
37. A short stock position and a long call position.
Class of options
Synthetic long put
Volatility
Option writer
38. A position resulting from the sale of a contract or instrument that you do not own.
Bear spread
Backspread
Short
At-the-money
39. 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.
Bear spread
Butterfly spead (Put)
Synthetics
Time decay
40. The largest and oldest listed options exchange.
At-the-money
Diagonal spread
Chicago Board Options Exchange (CBOE)
Last trading day
41. 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)
Vega
Expiration time
Neutral
42. 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).
Equivalent strategy
Broker/Dealer
Butterfly spread (Call)
Butterfly spread (Call)
43. Interest rate at which brokerage firms borrow from banks to finance their clients' security positions. The call loan rate is sometimes used because the loans can be called on a 24-hour notice.
Selling short
Combination
Ratio write
Broker loan rate
44. Calculations performed on updated prices.
Carry/Carrying charge
Debit spread
Analytics
Put-call ratio
45. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.
Pin risk
Implied volatility
Expiration
Iron butterfly
46. A credit spread in which a decline in the price of the underlying security will theoretically increase the value of the spread. (buying 1 XYZ Jan 55 call and writing 1 XYZ Jan 50 call)
Spread
Bear spread (call)
Butterfly spead (Put)
Arbitrage
47. 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.
Expiration time
Hedging
Option
Pin risk
48. An order that is designated to be executed on or before the expiration date. (all or none)
Combination
Combination
Option Chain
AON
49. 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
In-the-money option (ITM)
Butterfly spread (Call)
Interest rate risk
Bear spread
50. 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
Selling short
Leg
Open interest
Box spread