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Options Trading
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industries
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business-skills
Instructions:
Answer 50 questions in 15 minutes.
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study here
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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 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.
Neutral spread
Synthetic short put
Offer price
Butterfly spead (Put)
2. 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
Reverse conversion
Time value
Backspread
3. The simultaneous purchase and sale of options of the same class at different strike prices - but with the same expiration date. (ABC April 150/155 call spread. you purchase the ABC Apr 150 call and sell the ABC Apr 155 call). similar to the outright
Vertical spread
Early exercise
Bull spread (put)
Hedging
4. 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)
Bull spread (put)
Short stock position
Strangle
Time value
5. An option that has intrinsic value
Strike price
In-the-money option (ITM)
Time value
Calendar spread
6. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
Index
Bear market
Conversion
Bull spread (put)
7. Amount by which an option is ITM.
Leverage
Intrinsic value
Horizontal spread
Vega
8. 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.
Conversion
Combination
Vertical spread
Index option
9. A measure of actual stock price changes over a specific period of time.
CTA
Ratio write
Historic volatility
AON
10. 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.
AON
At-the-money
Ask/ask price
Contract size
11. 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.
Theta
Uncovered option/Naked option
Covered call/Covered call writing
In-the-money option (ITM)
12. 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.
Premium
Arbitrage
Expiration date
Equivalent strategy
13. An order to buy or sell a security that will remain in effect until the order is executed or canceled
Bear market
Uncovered option/Naked option
ATM
Good til cancel (GTC) order
14. The simultaneous purchase and sale of options of the same class at different strike prices - but with the same expiration date. (ABC April 150/155 call spread. you purchase the ABC Apr 150 call and sell the ABC Apr 155 call). similar to the outright
Box spread
Interest
Future
Vertical spread
15. 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
Bear spread (call)
Horizontal spread
LEAPS
Expiration cycle
16. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.
Uncovered option/Naked option
Option writer
Condor spread
Expiration time
17. 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
Short stock position
Indexing
Gamma
Early exercise
18. An option on shares of an individual common stock.
Open interest
Premium
Time spread/Calendar spread/Horizontal spread
Equity option
19. 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
Credit spread
American-style options
Historic volatility
20. 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
Vega
Bear spread
Vertical spread
21. A long stock position and a long put position.
reaking
Interest
Volatility
Synthetic Long call
22. A prolonged period of falling prices. A bear market in stocks is usually brought on by the anticipation of declining economic activity.
Class of options
Selling short
Index
Bear market
23. 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.
Early exercise
Bear spread (call)
Debit spread
Backspread
24. The largest and oldest listed options exchange.
Open interest
Automatic exercise
Rho
Chicago Board Options Exchange (CBOE)
25. A long call position and a short put position.
Synthetic long stock
Assigned
Bull (or bullish) spread
Debit spread
26. 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)
Options pricing curve
Short
Bull spread (call)
Edge
27. The process by which the seller of an option is notified of the buyer's intention to exercise that option.
Pin risk
Assignment
European-style option
Indexing
28. 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
Debit spread
Market on close (MOC)
Conversion
Bear
29. 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.
Index
Diagonal spread
Synthetic short stock
Option
30. Designated primary market maker.
American-style options
DPM
Implied volatility
Bear
31. 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
Last trading day
Underlying
Long position
Expiration cycle
32. A term referring to all options of the same type- either calls or puts- having the same underlying instrument.
Expiration month
Cash-settled American index options (cash index)
Class of options
Implied volatility
33. Commodity trading advisor.
Cash-settled American index options (cash index)
Selling short
Good til cancel (GTC) order
CTA
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)
Debit spread
Series of options
Butterfly spead (Put)
Bull spread (call)
35. Received notification of an assignment by rhw options clearing corporation.
Synthetic Long call
Credit spread
Break-even point(s)
Assigned
36. A long call butterfly is created by buying one call at the lowest strike price - selling two calls at the middle strike price - and buying one call at the highest strike price. (buying 1 ABC Jan 40 call - writing 2 ABC Jan 45 calls - and buying 1 ABC
Horizontal spread
Open interest
Butterfly spread (Call)
DPM
37. 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.
Debit spread
Contract size
Arbitrage
Hedging
38. At the money
Carry/Carrying charge
Theoretical value (TV)
Interest
ATM
39. 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.
Condor spread
Premium
Ratio write
Interest
40. The total price of an option: intrinsic value plus extrinsic value
Premium
Short stock position
Neutral
Put-call ratio
41. Received notification of an assignment by rhw options clearing corporation.
Broker/Dealer
Assigned
Butterfly spread
Bull spread (call)
42. A measure of actual stock price changes over a specific period of time.
At-the-money
Index
Put-call ratio
Historic volatility
43. An option that can be exercised only at expiration. Usually expire the third Friday of every month
Backspread
European-style option
Premium
Bull spread (call)
44. The instrument (stock - future - or cash index) to be delivered when an option is exercised.
Straddle
Bear spread (call)
Time spread/Calendar spread/Horizontal spread
Underlying
45. Good Til Cancel
GTC
Carry/Carrying charge
Time value
Gamma
46. 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)
Reverse conversion
Exercise
Covered call/Covered call writing
47. The interest expense on money borrowed to finance a margined securities position.
Carry/Carrying charge
Synthetic Long call
Theta
Assigned
48. 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
Vertical spread
Condor spread
Bear spread
Hedging
49. Third Friday of expiration month
Last trading day
Collar
Extrinsic value
Time decay
50. A position resulting from the sale of a contract or instrument that you do not own.
Short
Straddle
Time spread/Calendar spread/Horizontal spread
Put-call ratio
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