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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 measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.
Carry/Carrying charge
Implied volatility
Expiration cycle
Backspread
2. A facility that compares and reconciles both sides of a trade in addition to receiving and delivering payments and securities.
Fill-or-kill order (FOK)
Uncovered option/Naked option
Clearinghouse
Time spread/Calendar spread/Horizontal spread
3. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.
Broker/Dealer
Carry/Carrying charge
Options pricing curve
Future
4. An order that is designated to be executed on or before the expiration date. (all or none)
Assignment
Extrinsic value
All-or-none order (AON)
AON
5. 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
CTA
Broker/Dealer
Expiration cycle
Adjusted Option
6. 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
Expiration date
Straddle
Vertical spread
Short
7. A list of the options available for the underlying stock symbols in which you are interested.
LEAPS
Leg
Option Chain
Expiration
8. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.
AON
Strangle
Expiration cycle
Broker/Dealer
9. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.
Options pricing curve
Expiration cycle
Option writer
Fill-or-kill order (FOK)
10. 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.
Open interest
Investment
Backspread
Condor spread
11. 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)
Covered call/Covered call writing
Cash-settled American index options (cash index)
Bull (or bullish) spread
Collar
12. The risk to an investor that the stock price will exactly equal the strike price of a written option at expiration. (risk to be pinned with stock)
Spread
Pin risk
Credit spread
Last trading day
13. A spread in which the difference in the long and short options premiums results in a net debit.
Covered option
Bull (or bullish) spread
Debit spread
ATM
14. An option that has intrinsic value
Horizontal spread
Synthetic long stock
In-the-money option (ITM)
Synthetic Long call
15. 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]
Assigned
Time spread/Calendar spread/Horizontal spread
Neutral
Hedging
16. Process by which the holder of an option notifies the seller of intention to take delivery of the underlying in the case of a call - or make delivery in the case of a put - at the specified exercise price.
All-or-none order (AON)
Neutral spread
Exercise
reaking
17. A list of the options available for the underlying stock symbols in which you are interested.
Option Chain
Butterfly spread
Interest
Option
18. A short call position and a long put position.
At-the-money
Synthetic short stock
Break-even point(s)
Historic volatility
19. 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.
Put-call ratio
Conversion
Bear
Call Option
20. 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.
Synthetic short put
Bull spread (put)
Delta
Arbitrage
21. Process by which the holder of an option notifies the seller of intention to take delivery of the underlying in the case of a call - or make delivery in the case of a put - at the specified exercise price.
Hedging
Bear spread (call)
Historic volatility
Exercise
22. 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.
Neutral
Put-call ratio
Leverage
Hedging
23. A position established with the specific intent of protecting an existing position. (an owner of common stock may buy a put option to hedge against a possible stock price decline).
Expiration time
Credit spread
Neutral
Hedge/Hedged position
24. A type of order that requires that the order be executed completely or not at all.
Fill-or-kill order (FOK)
Contract size
Index
Expiration cycle
25. Options that may be exercised on or before the expiration date.
Bear market
American-style options
GTC
Strangle
26. An option created as the result of a special event such as a stock split - stock dividend - merger or spin-off taking place during the life of an option. ( adjusted option may cover more than the usual one hundred shares)
Good til cancel (GTC) order
Adjusted Option
Bear
Bull spread (put)
27. 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)
Options pricing model
Covered option
Last trading day
Indexing
28. A position that will perform best if there is little or no net change in the price of the underlying stock.
Bull (or bullish) spread
Neutral spread
Investment
Bull (or bullish) spread
29. 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.
Spread
Box spread
Butterfly spead (Put)
Option
30. A short stock position and a short put position.
Equity option
Synthetic short call
Neutral strategy
Ratio write
31. The price of an option less its intrinsic value. The entire premium of an out-of-the-money option consists of extrinsic value. This is often referred to as the time value portion of option premiums.
Vertical spread
Bull spread (call)
Extrinsic value
Early exercise
32. 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
Chicago Board Options Exchange (CBOE)
Spread
Collar
Option Chain
33. The estimated value of an option derived from a mathematical model.
Long position
Diagonal spread
Synthetic short call
Theoretical value (TV)
34. A position that will perform best if there is little or no net change in the price of the underlying stock.
Butterfly spead (Put)
Short
Neutral spread
Assignment
35. The use of money to create more money through an appreciating or income-producing asset.
Index option
Bear
Covered option
Investment
36. Same as ask price
Option Chain
Offer price
Options pricing model
Debit spread
37. 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
Synthetic long put
Premium
Synthetic long stock
Interest rate risk
38. The date an option contract becomes void.
Intrinsic value
Edge
Theta
Expiration
39. A measure of actual stock price changes over a specific period of time.
Historic volatility
Early exercise
Calendar spread
Cash-settled American index options (cash index)
40. 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.
Carry/Carrying charge
Ratio write
European-style option
Bear market
41. The degree to which the price of an underlying tends to fluctuate over time. This variable - which the market implies to the underlying - may result from pricing an option through a model.
Volatility
Intrinsic value
Delta
Implied volatility
42. A facility that compares and reconciles both sides of a trade in addition to receiving and delivering payments and securities.
Clearinghouse
Short stock position
Expiration
Arbitrage
43. An order that is designated to be executed on or before the expiration date.
Synthetic long stock
Selling short
All-or-none order (AON)
Premium
44. An option whose underlying asset is an index.
Bull (or bullish) spread
Premium
Index option
Butterfly spead (Put)
45. Designated primary market maker.
Exercise
Uncovered option/Naked option
DPM
Rho
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
Box spread
Synthetic long stock
Call Option
47. 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
Uncovered option/Naked option
In-the-money option (ITM)
Condor spread
Interest
48. The number of underlying shares covered by one option contract. (100 shares for one equity option)
Equivalent strategy
Contract size
Calendar spread
Hedge/Hedged position
49. Calculations performed on updated prices.
Exercise
Analytics
Gamma
Carry/Carrying charge
50. 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.
Short stock position
Delta
Historic volatility
CTA