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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. 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
Time value
Butterfly spread
Extrinsic value
Fences
2. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
Index
Collar
Assignment
Option
3. An individual with the opinion that a security - or the market in general will decline in price; someone having a negative or pessimistic outlook.
Automatic exercise
Contract size
GTC
Bear
4. The purchase or sale of an equal number of puts or calls with the same underlying - stike price - and expiration.
Time spread/Calendar spread/Horizontal spread
Volatility
Neutral strategy
Straddle
5. Received notification of an assignment by rhw options clearing corporation.
Synthetic short call
Uncovered option/Naked option
Assigned
Condor spread
6. 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.
Black-Scholes formula
Butterfly spread (Call)
DPM
Historic volatility
7. Opening sale of a security.
Time decay
Broker/Dealer
Selling short
Bear market
8. Fill-or-kill order
Ratio write
FOK
Calendar spread
Short
9. The interest expense on money borrowed to finance a margined securities position.
Assignment
Leverage
Analytics
Carry/Carrying charge
10. The time of day by which all exercise notices must be received on the expiration date.
Chicago Board Options Exchange (CBOE)
Expiration time
Out-of-the-money (OTM)
Contract size
11. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.
Adjusted Option
Neutral spread
Synthetic short stock
Strangle
12. 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
reaking
Volatility
Time value
Interest rate risk
13. 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.
Long position
Exercise
Covered call/Covered call writing
Arbitrage
14. A list of the options available for the underlying stock symbols in which you are interested.
Time decay
Intrinsic value
Strangle
Option Chain
15. Calculations performed on updated prices.
ATM
Reverse conversion
Put-call ratio
Analytics
16. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.
Chicago Board Options Exchange (CBOE)
Implied volatility
Box spread
AON
17. An order that is designated to be executed on or before the expiration date.
Broker loan rate
All-or-none order (AON)
Hedge/Hedged position
Open interest
18. 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
Bid/bid price
Covered option
Uncovered option/Naked option
Last trading day
19. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.
Bull (or bullish) spread
Butterfly spread
Bear
Fences
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.
Bear
Diagonal spread
Good til cancel (GTC) order
Put-call ratio
21. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
Leverage
Synthetic short call
Bear spread
Index
22. Same as ask price
Strangle
Neutral strategy
Adjusted Option
Offer price
23. A long stock position and a short call position.
Calendar spread
Edge
Expiration
Synthetic short put
24. An option on shares of an individual common stock.
Equity option
Long position
Edge
Time spread/Calendar spread/Horizontal spread
25. Procedure used by the options clearing corporation to exercise in-the-money options at expiration. (75 cents or more)
Vertical spread
Automatic exercise
Bear
Time spread/Calendar spread/Horizontal spread
26. Another name for calendar spread.
Bull spread (put)
Reverse conversion
Horizontal spread
Strangle
27. An option that can be exercised only at expiration. Usually expire the third Friday of every month
Strike price
European-style option
Backspread
FOK
28. 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.
Break-even point(s)
Put-call ratio
GTC
Synthetic short put
29. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
Leverage
Spread
Series of options
Selling short
30. A a feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.
Early exercise
Future
Equivalent strategy
Synthetic Long call
31. The instrument (stock - future - or cash index) to be delivered when an option is exercised.
Covered option
Option writer
Underlying
Synthetic long stock
32. An option that has intrinsic value
Carry/Carrying charge
Break-even point(s)
Time value
In-the-money option (ITM)
33. A type of order that requires that the order be executed completely or not at all.
Calendar spread
Bear spread (put)
All-or-none order (AON)
Fill-or-kill order (FOK)
34. Same as ask price
Short stock position
Offer price
Pin risk
Collar
35. The estimated value of an option derived from a mathematical model.
Ask/ask price
Bull (or bullish) spread
Out-of-the-money (OTM)
Theoretical value (TV)
36. The total number of outstanding option contracts in a given series
Bear spread (put)
Debit spread
Automatic exercise
Open interest
37. A person who believes that a security - or the market in general - will rise in price; a positive or optimistic outlook.
Vega
Black-Scholes formula
Leverage
Bull
38. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.
Theta
Neutral strategy
Strangle
GTC
39. 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.
Option writer
Carry/Carrying charge
Last trading day
Edge
40. 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)
CTA
Expiration
Bull spread (put)
Open interest
41. 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.
European-style option
Ratio write
Early exercise
Time value
42. The number of underlying shares covered by one option contract. (100 shares for one equity option)
CTA
Contract size
Collar
Chicago Board Options Exchange (CBOE)
43. 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
In-the-money option (ITM)
Condor spread
All-or-none order (AON)
Uncovered option/Naked option
44. The price that an owner of an option can purchase (call) or sell (put) the underlying stock.
Strike price
Pin risk
Theoretical value (TV)
Bull (or bullish) spread
45. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
Leg
Series of options
Reverse conversion
Options pricing curve
46. 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).
Options pricing curve
Equivalent strategy
Long position
Analytics
47. A position that will perform best if there is little or no net change in the price of the underlying stock.
Neutral spread
Synthetic long put
Combination
ATM
48. 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]
Time spread/Calendar spread/Horizontal spread
Black-Scholes formula
Short
Covered option
49. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
Neutral spread
LEAPS
Bear spread
Condor spread
50. 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
Options pricing curve
Spread
Expiration