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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. Amount by which an option is ITM.
Extrinsic value
Intrinsic value
American-style options
Implied volatility
2. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
Index option
Implied volatility
Ask/ask price
Combination
3. 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
GTC
Hedging
Selling short
4. 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
All-or-none order (AON)
Assigned
Expiration time
Vertical spread
5. A term referring to all options of the same type- either calls or puts- having the same underlying instrument.
Class of options
Index
Rho
Option Chain
6. Charge levied for the privilege ofborrowing money
Interest
Uncovered option/Naked option
Assignment
Assignment
7. A means of increasing return or worth without increasing investment.
Synthetics
Equivalent strategy
Bear spread
Leverage
8. Charge levied for the privilege ofborrowing money
Debit spread
Series of options
GTC
Interest
9. At the money
Carry/Carrying charge
ATM
Ratio write
Fill-or-kill order (FOK)
10. 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
Gamma
Edge
Bear market
Fences
11. 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
Interest
Box spread
AON
Synthetics
12. The number of underlying shares covered by one option contract. (100 shares for one equity option)
Put-call ratio
Offer price
Option Chain
Contract size
13. A short call position and a long put position.
Index option
Expiration date
European-style option
Synthetic short stock
14. The time of day by which all exercise notices must be received on the expiration date.
Delta
Combination
Expiration time
Expiration month
15. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
Index
Bull spread (put)
Synthetic short put
GTC
16. The total number of outstanding option contracts in a given series
AON
Open interest
Adjusted Option
Butterfly spread (Call)
17. A strategy consisting of at least two components transacted simultaneously. The price relationship between each part - or 'leg -' could change based on a move in underlying price and or volatility. A spread is entered into with the expectation of eit
Spread
Bear market
Time decay
Credit spread
18. A facility that compares and reconciles both sides of a trade in addition to receiving and delivering payments and securities.
Synthetic short call
Clearinghouse
Implied volatility
Ask/ask price
19. The month during which the expiration date occurs
Offer price
Expiration cycle
Expiration month
Analytics
20. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.
Option writer
Fill-or-kill order (FOK)
Expiration cycle
Uncovered option/Naked option
21. 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.
Premium
Rho
Delta
Diagonal spread
22. Another name for calendar spread.
Interest
Last trading day
Horizontal spread
Pin risk
23. 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.
Expiration date
Assignment
Interest rate risk
Bid/bid price
24. 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.
All-or-none order (AON)
Call Option
Covered option
Broker loan rate
25. The time of day by which all exercise notices must be received on the expiration date.
Black-Scholes formula
Combination
Pin risk
Expiration time
26. A short stock position and a short put position.
Synthetic short call
Time spread/Calendar spread/Horizontal spread
Short stock position
Butterfly spead (Put)
27. The largest and oldest listed options exchange.
Delta
Expiration
Expiration date
Chicago Board Options Exchange (CBOE)
28. 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 spread
Hedging
Long position
Arbitrage
29. 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.
Automatic exercise
Good til cancel (GTC) order
Bear
Arbitrage
30. 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.
Credit spread
Time spread/Calendar spread/Horizontal spread
Call Option
European-style option
31. The price that an owner of an option can purchase (call) or sell (put) the underlying stock.
In-the-money option (ITM)
European-style option
Strike price
Option writer
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
Reverse conversion
Option Chain
Interest
Future
33. The largest and oldest listed options exchange.
Chicago Board Options Exchange (CBOE)
Analytics
AON
Last trading day
34. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.
Strangle
Underlying
Hedging
Iron butterfly
35. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.
Option writer
Synthetics
Butterfly spead (Put)
Ratio write
36. 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
Cash-settled American index options (cash index)
Ask/ask price
Fences
Put-call ratio
37. 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.
Option
Covered call/Covered call writing
Leg
Delta
38. 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
Implied volatility
Short stock position
Diagonal spread
Horizontal spread
39. Amount by which an option is ITM.
Conversion
Intrinsic value
Bear spread (put)
Box spread
40. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
Investment
Index
Backspread
Synthetics
41. A person who believes that a security - or the market in general - will rise in price; a positive or optimistic outlook.
Bear
Iron butterfly
Bull
Box spread
42. An option whose underlying asset is an index.
Index option
Delta
Expiration cycle
Selling short
43. A long stock position and a short call position.
Synthetic short put
FOK
Hedging
Last trading day
44. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.
Volatility
Implied volatility
Bull spread (call)
Expiration time
45. An option that has intrinsic value
Interest
In-the-money option (ITM)
Strike price
Neutral
46. 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
Assigned
Conversion
Analytics
Synthetic Long call
47. Opening sale of a security.
Selling short
Ratio write
Contract size
Leg
48. 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
Time decay
Box spread
Extrinsic value
Iron butterfly
49. An order that is designated to be executed on or before the expiration date. (all or none)
Reverse conversion
AON
Analytics
Investment
50. 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.
Assigned
Straddle
Options pricing model
Exercise