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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 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.






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.






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






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)






5. An option that has intrinsic value






6. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).






7. Amount by which an option is ITM.






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.






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






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.






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.






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.






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






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






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






16. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.






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






18. An option on shares of an individual common stock.






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.






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).






21. A long stock position and a long put position.






22. A prolonged period of falling prices. A bear market in stocks is usually brought on by the anticipation of declining economic activity.






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.






24. The largest and oldest listed options exchange.






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






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)






27. The process by which the seller of an option is notified of the buyer's intention to exercise that option.






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






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.






30. Designated primary market maker.






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






32. A term referring to all options of the same type- either calls or puts- having the same underlying instrument.






33. Commodity trading advisor.






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)






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






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






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.






38. At the money






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.






40. The total price of an option: intrinsic value plus extrinsic value






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






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






43. An option that can be exercised only at expiration. Usually expire the third Friday of every month






44. The instrument (stock - future - or cash index) to be delivered when an option is exercised.






45. Good Til Cancel






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.






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






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






49. Third Friday of expiration month






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






Can you answer 50 questions in 15 minutes?



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