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






2. An option that has intrinsic value






3. 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)






4. A facility that compares and reconciles both sides of a trade in addition to receiving and delivering payments and securities.






5. 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.






6. 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.






7. A short call position and a long put position.






8. An option whose underlying asset is an index.






9. Designated primary market maker.






10. 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






11. 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.






12. The total number of outstanding option contracts in a given series






13. The month during which the expiration date occurs






14. A person who believes that a security - or the market in general - will rise in price; a positive or optimistic outlook.






15. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.






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






17. The month during which the expiration date occurs






18. 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)






19. A position that will perform best if there is little or no net change in the price of the underlying stock.






20. 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]






21. A credit spread in which a rise in price of the underlying security will theoretically increase the profit value of the spread. (writing 1 XYZ Jan 55 put and buying 1 XYZ Jan 50 put)






22. 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.






23. 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.






24. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.






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






26. 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.






27. An order to buy or sell at the last price on the close.






28. Amount by which an option is ITM.






29. 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)






30. A position resulting from the sale of a contract or instrument that you do not own.






31. A means of increasing return or worth without increasing investment.






32. 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






33. Options that may be exercised on or before the expiration date.






34. A long call position and a short put position.






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






36. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.






37. A person who believes that a security - or the market in general - will rise in price; a positive or optimistic outlook.






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






39. An order that is designated to be executed on or before the expiration date. (all or none)






40. Received notification of an assignment by rhw options clearing corporation.






41. An order to buy or sell a security that will remain in effect until the order is executed or canceled






42. 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.






43. 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






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






45. Good Til Cancel






46. 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






47. The number of underlying shares covered by one option contract. (100 shares for one equity option)






48. 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.






49. Received notification of an assignment by rhw options clearing corporation.






50. 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)






Can you answer 50 questions in 15 minutes?



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