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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. 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)
Clearinghouse
Expiration date
Expiration time
2. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.
Leverage
Vertical spread
Bear spread
Butterfly spread
3. A term referring to all options of the same type- either calls or puts- having the same underlying instrument.
Vega
Class of options
Option
Good til cancel (GTC) order
4. 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).
Strike price
Historic volatility
Equivalent strategy
Time spread/Calendar spread/Horizontal spread
5. 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.
Straddle
Break-even point(s)
AON
Broker loan rate
6. 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.
Automatic exercise
Early exercise
Expiration date
Good til cancel (GTC) order
7. 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.
Intrinsic value
Call Option
Exercise
Expiration
8. A term describing one side of a spread position. A trader who legs into a spread establishes one side first - hoping for a favorable price movement so the other side can be executed at a better price.
Combination
Series of options
AON
Leg
9. Amount by which an option is ITM.
Bear spread
Gamma
European-style option
Intrinsic value
10. A strategy involving four options and four strike prices - and that has both limited risk and limited profit potential. A long call condor spread is establish by buying one call the lowest strike - writing one call at the second strike - writing anot
Condor spread
Premium
Indexing
Synthetic short put
11. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.
Class of options
Time value
Gamma
Implied volatility
12. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
Credit spread
Class of options
At-the-money
Series of options
13. 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.
Class of options
Interest rate risk
Delta
Implied volatility
14. 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.
Short
Early exercise
Extrinsic value
Last trading day
15. A long stock position and a long put position.
Historic volatility
Synthetic Long call
Synthetic long stock
Indexing
16. The part of an options total price that exceeds its intrinsic value. Price of an out-of-money option consists entirely of time value.
Clearinghouse
Time value
Offer price
LEAPS
17. 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.
Index option
Vega
Option Chain
Black-Scholes formula
18. The difference in the premium prices of two options - where the credit premium of the one sold exceeds the debit premium of the one purchased. A bull spread with puts and a bear spread with calls are examples of credit spreads.
American-style options
Assigned
Credit spread
Theta
19. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
Ask/ask price
Option writer
Selling short
Box spread
20. The highest price a dealer is willing to pay for a security at a particular time.
Bid/bid price
Hedging
Leg
Delta
21. A short stock position and a short put position.
Put-call ratio
reaking
Analytics
Synthetic short call
22. 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
Iron butterfly
Index option
American-style options
Backspread
23. 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.
Neutral strategy
CTA
At-the-money
Spread
24. 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.
Premium
Broker loan rate
Vega
Extrinsic value
25. A debit spread in which a decline in the price of the underlying security will theoretically increase the value of the spread. (writing 1 XYZ Jan 50 put and buying 1 XYZ Jan 55 put)
Options pricing model
Bear spread (put)
American-style options
Good til cancel (GTC) order
26. 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
Short
Straddle
In-the-money option (ITM)
Box spread
27. Designated primary market maker.
Index option
DPM
At-the-money
Leverage
28. 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
Bull
Fences
Indexing
Combination
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.
Volatility
GTC
Option
Indexing
30. 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.
Historic volatility
Extrinsic value
Combination
DPM
31. An order that is designated to be executed on or before the expiration date. (all or none)
AON
Diagonal spread
Neutral
Synthetic long put
32. A short call position and a long put position.
Synthetic short stock
Good til cancel (GTC) order
Delta
Theoretical value (TV)
33. A facility that compares and reconciles both sides of a trade in addition to receiving and delivering payments and securities.
Clearinghouse
Arbitrage
Interest rate risk
Debit spread
34. A strategy involving four options and four strike prices - and that has both limited risk and limited profit potential. A long call condor spread is establish by buying one call the lowest strike - writing one call at the second strike - writing anot
Conversion
Clearinghouse
Condor spread
Long position
35. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
Good til cancel (GTC) order
LEAPS
At-the-money
Neutral strategy
36. The interest expense on money borrowed to finance a margined securities position.
CTA
Rho
Bull
Carry/Carrying charge
37. Fill-or-kill order
Option Chain
Time spread/Calendar spread/Horizontal spread
Equity option
FOK
38. A short call position and a long put position.
Synthetic short stock
Expiration time
Put-call ratio
Neutral strategy
39. The price that an owner of an option can purchase (call) or sell (put) the underlying stock.
Vega
Strike price
Synthetic long stock
Short stock position
40. A long call position and a short put position.
Synthetic long stock
Cash-settled American index options (cash index)
Adjusted Option
Assigned
41. 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.
Options pricing model
Backspread
Option Chain
Straddle
42. A market drop in the price of a security
In-the-money option (ITM)
Option Chain
Intrinsic value
reaking
43. An option whose underlying asset is an index.
Index option
Covered call/Covered call writing
Intrinsic value
Spread
44. A position that will perform best if there is little or no net change in the price of the underlying stock.
Fill-or-kill order (FOK)
Neutral spread
Underlying
LEAPS
45. 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
Rho
Gamma
Long position
46. An order to buy or sell a security that will remain in effect until the order is executed or canceled
Long position
Neutral strategy
Good til cancel (GTC) order
Collar
47. A debit spread in which a decline in the price of the underlying security will theoretically increase the value of the spread. (writing 1 XYZ Jan 50 put and buying 1 XYZ Jan 55 put)
Ratio write
Assignment
Bear spread (put)
ATM
48. Another name for calendar spread.
Delta
Horizontal spread
Collar
Broker loan rate
49. The difference in the premium prices of two options - where the credit premium of the one sold exceeds the debit premium of the one purchased. A bull spread with puts and a bear spread with calls are examples of credit spreads.
Credit spread
Fences
Expiration
Option Chain
50. 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.
AON
Early exercise
Butterfly spead (Put)
Butterfly spread