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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 long stock position and a long put position.
Synthetic Long call
CTA
GTC
Expiration cycle
2. 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.
Cash-settled American index options (cash index)
Equity option
Condor spread
Expiration date
3. 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.
Broker loan rate
Neutral spread
Black-Scholes formula
Backspread
4. 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
Expiration cycle
Cash-settled American index options (cash index)
Backspread
LEAPS
5. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
Assignment
Ask/ask price
In-the-money option (ITM)
Bear spread (put)
6. A strategy involving two or more options of the same type (or options combined with an underlying stock position) that will profit from a rise in the price of the underlying stock. Consists or selling an option with a higher strike - and buying an op
Bull (or bullish) spread
Expiration time
Adjusted Option
LEAPS
7. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.
Strangle
Reverse conversion
Credit spread
Horizontal spread
8. Opening sale of a security.
Interest
Selling short
Bull (or bullish) spread
Synthetic short put
9. 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
Carry/Carrying charge
Uncovered option/Naked option
Theoretical value (TV)
10. An order that is designated to be executed on or before the expiration date.
Hedging
All-or-none order (AON)
Synthetic Long call
reaking
11. A contract between a buyer and seller whereby the buyer acquires the right - but not the obligation - to buy a specified underlying instrument at a fixed price on or before a specified date.
Call Option
Expiration
Leverage
Bear
12. The process by which the seller of an option is notified of the buyer's intention to exercise that option.
Assignment
Short stock position
Time value
Broker/Dealer
13. A prolonged period of falling prices. A bear market in stocks is usually brought on by the anticipation of declining economic activity.
Implied volatility
Underlying
Series of options
Bear market
14. An option whose underlying asset is an index.
Index option
Fill-or-kill order (FOK)
Synthetic long stock
Equity option
15. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
Broker loan rate
Offer price
Combination
Series of options
16. The total price of an option: intrinsic value plus extrinsic value
Clearinghouse
Premium
Leg
Reverse conversion
17. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
Open interest
Assigned
Edge
Series of options
18. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.
Pin risk
Option writer
Reverse conversion
Assignment
19. A a feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.
Indexing
Early exercise
Premium
Synthetic long stock
20. 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
Adjusted Option
reaking
Ratio write
21. The sensitivity of an options theoretical value to a change in implied volatility.
Bull spread (put)
Assigned
Vega
Automatic exercise
22. An order to buy or sell at the last price on the close.
Expiration time
Option Chain
Market on close (MOC)
Offer price
23. 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
Intrinsic value
AON
Options pricing model
Expiration cycle
24. Another name for calendar spread.
Diagonal spread
Horizontal spread
Intrinsic value
All-or-none order (AON)
25. 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.
Underlying
Long position
Options pricing model
CTA
26. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.
Condor spread
Options pricing curve
Chicago Board Options Exchange (CBOE)
AON
27. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.
Open interest
Butterfly spread
Vega
Theta
28. 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)
Delta
Synthetic short stock
American-style options
29. Designated primary market maker.
Spread
Leg
Future
DPM
30. 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 month
Last trading day
Uncovered option/Naked option
Bear spread
31. The time of day by which all exercise notices must be received on the expiration date.
Expiration time
Butterfly spread (Call)
Bull spread (put)
Short stock position
32. 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.
Market on close (MOC)
Uncovered option/Naked option
Synthetics
Backspread
33. 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
Calendar spread
Vertical spread
Expiration month
Option writer
34. 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)
Volatility
Neutral
Options pricing model
Neutral spread
35. A a feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.
ATM
Option Chain
Early exercise
Call Option
36. The total price of an option: intrinsic value plus extrinsic value
Break-even point(s)
Butterfly spread (Call)
Premium
In-the-money option (ITM)
37. Calculations performed on updated prices.
Extrinsic value
Covered option
Analytics
Gamma
38. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.
Rho
Hedging
Pin risk
Neutral
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.
Collar
Iron butterfly
Time spread/Calendar spread/Horizontal spread
Butterfly spead (Put)
40. 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.
Covered option
Short
Time decay
Covered option
41. A type of order that requires that the order be executed completely or not at all.
Fill-or-kill order (FOK)
Long position
Open interest
Covered option
42. 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.
Contract size
Black-Scholes formula
Bear spread
Class of options
43. A type of order that requires that the order be executed completely or not at all.
Fill-or-kill order (FOK)
Synthetic long stock
Pin risk
Synthetics
44. A short stock position and a short put position.
Synthetic short call
Bull spread (put)
Interest
Fences
45. 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.
Volatility
Break-even point(s)
Covered call/Covered call writing
Cash-settled American index options (cash index)
46. 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.
Ratio write
Expiration month
Open interest
Implied volatility
47. 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.
Ratio write
Collar
Butterfly spread (Call)
Straddle
48. In a customer transaction - edge refers to the markup or markdown price that a market maker generates in the deal. It can be thought of as a tax charged by the market maker for services rendered.
Leg
Index option
Clearinghouse
Edge
49. A short stock position and a long call position.
Iron butterfly
Bull spread (call)
Synthetic long put
Expiration month
50. 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.
Expiration
Diagonal spread
Chicago Board Options Exchange (CBOE)
Cash-settled American index options (cash index)