SUBJECTS
|
BROWSE
|
CAREER CENTER
|
POPULAR
|
JOIN
|
LOGIN
Business Skills
|
Soft Skills
|
Basic Literacy
|
Certifications
About
|
Help
|
Privacy
|
Terms
|
Email
Search
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 compilation of the prices of several common entities into a single number; ex (S&P 100 Index).
Index
Short
Bear spread (call)
Clearinghouse
2. 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
Straddle
Interest rate risk
Expiration
3. 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
Automatic exercise
Iron butterfly
Butterfly spread (Call)
Out-of-the-money (OTM)
4. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
Options pricing curve
Ask/ask price
Vertical spread
European-style option
5. At the money
ATM
Cash-settled American index options (cash index)
Index
Volatility
6. 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
Synthetic short put
Index
Collar
Conversion
7. 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
Conversion
Box spread
Expiration date
Delta
8. The total price of an option: intrinsic value plus extrinsic value
Neutral spread
Extrinsic value
Premium
reaking
9. Received notification of an assignment by rhw options clearing corporation.
Assigned
Theoretical value (TV)
Time value
Premium
10. 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.
Index option
Backspread
Combination
Covered call/Covered call writing
11. A short stock position and a long call position.
Last trading day
Time decay
Synthetic long put
Series of options
12. 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.
Butterfly spead (Put)
Hedging
At-the-money
Edge
13. The number of underlying shares covered by one option contract. (100 shares for one equity option)
Index option
Contract size
Time decay
Long position
14. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
Series of options
Volatility
Exercise
Covered option
15. 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.
Bull spread (call)
Backspread
Expiration
Broker loan rate
16. 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)
Pin risk
Theoretical value (TV)
Ask/ask price
Covered call/Covered call writing
17. 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.
European-style option
Short
Interest rate risk
Time decay
18. 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
reaking
Expiration cycle
Condor spread
Ratio write
19. 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
Equivalent strategy
LEAPS
Expiration cycle
Options pricing model
20. 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)
Butterfly spread (Call)
Bear spread (put)
Clearinghouse
Debit spread
21. 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.
European-style option
Bull spread (call)
In-the-money option (ITM)
Rho
22. Designated primary market maker.
Bull
Call Option
DPM
Break-even point(s)
23. 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]
Theoretical value (TV)
Equivalent strategy
Time spread/Calendar spread/Horizontal spread
Condor spread
24. The part of an options total price that exceeds its intrinsic value. Price of an out-of-money option consists entirely of time value.
Time value
Options pricing model
Bid/bid price
Selling short
25. 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
Strangle
Bull (or bullish) spread
Uncovered option/Naked option
Options pricing curve
26. The stock price(s) at which an option strategy results in neither a profit nor a loss.
Neutral
Straddle
Short
Break-even point(s)
27. An option on shares of an individual common stock.
Last trading day
Equity option
Volatility
Offer price
28. An agent who facilitates trades between a buyer and a seller and receives a commission for services.
Options pricing curve
Synthetic short put
Leverage
Broker/Dealer
29. A position resulting from the sale of a contract or instrument that you do not own.
Short
Premium
Butterfly spead (Put)
Bull (or bullish) spread
30. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.
Butterfly spead (Put)
Black-Scholes formula
Interest
Options pricing curve
31. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
Index
FOK
Butterfly spread
LEAPS
32. 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
Options pricing model
American-style options
Edge
33. A type of order that requires that the order be executed completely or not at all.
All-or-none order (AON)
Expiration cycle
CTA
Fill-or-kill order (FOK)
34. An order that is designated to be executed on or before the expiration date.
Debit spread
All-or-none order (AON)
Last trading day
Bear spread
35. The risk to an investor that the stock price will exactly equal the strike price of a written option at expiration. (risk to be pinned with stock)
Investment
Conversion
Black-Scholes formula
Pin risk
36. The total price of an option: intrinsic value plus extrinsic value
Premium
Short stock position
Expiration cycle
Options pricing model
37. 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
FOK
Options pricing curve
Interest rate risk
Assignment
38. An option that can be exercised only at expiration. Usually expire the third Friday of every month
European-style option
Long position
Black-Scholes formula
Option Chain
39. Calculations performed on updated prices.
Expiration cycle
Analytics
Historic volatility
Historic volatility
40. 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
Strangle
Short
DPM
Bull (or bullish) spread
41. Third Friday of expiration month
Theta
Automatic exercise
Bear spread
Last trading day
42. Amount by which an option is ITM.
Option
Equity option
Intrinsic value
Synthetic long stock
43. A short stock position and a short put position.
Calendar spread
Option
Synthetic short call
Diagonal spread
44. 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
Collar
Straddle
Clearinghouse
Interest
45. A long stock position and a long put position.
Straddle
Synthetic Long call
Bear market
Bull spread (call)
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.
Time decay
Selling short
Cash-settled American index options (cash index)
Diagonal spread
47. An option that has no intrinsic value.
Conversion
Bear spread
Hedge/Hedged position
Out-of-the-money (OTM)
48. Charge levied for the privilege ofborrowing money
Bear spread
Interest
Underlying
Synthetic Long call
49. The instrument (stock - future - or cash index) to be delivered when an option is exercised.
Underlying
Future
Horizontal spread
Fill-or-kill order (FOK)
50. 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.
Long position
Theoretical value (TV)
Time spread/Calendar spread/Horizontal spread
Strike price