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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. A short call position and a long put position.
Options pricing curve
Volatility
Synthetic short stock
Straddle
2. The interest expense on money borrowed to finance a margined securities position.
Carry/Carrying charge
Chicago Board Options Exchange (CBOE)
Option Chain
Bear spread (put)
3. 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.
Expiration time
Credit spread
Diagonal spread
LEAPS
4. 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.
Option writer
Theta
Extrinsic value
Contract size
5. The part of an options total price that exceeds its intrinsic value. Price of an out-of-money option consists entirely of time value.
Last trading day
Equivalent strategy
Time value
Synthetic Long call
6. Constructin a portfolio to match the performance of a broad-based index - such as the S&P 500. Individuals can do this by purchasing shares in an index mutual fund.
Indexing
Diagonal spread
Contract size
Gamma
7. A long stock position and a short call position.
Equivalent strategy
Adjusted Option
Chicago Board Options Exchange (CBOE)
Synthetic short put
8. An option created as the result of a special event such as a stock split - stock dividend - merger or spin-off taking place during the life of an option. ( adjusted option may cover more than the usual one hundred shares)
Adjusted Option
Reverse conversion
Covered option
Time value
9. 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.
Credit spread
Diagonal spread
Synthetic short stock
Edge
10. The number of underlying shares covered by one option contract. (100 shares for one equity option)
Contract size
Early exercise
Expiration
Theoretical value (TV)
11. 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
Rho
All-or-none order (AON)
All-or-none order (AON)
12. A person who believes that a security - or the market in general - will rise in price; a positive or optimistic outlook.
Bull
Analytics
Bid/bid price
Credit spread
13. 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
Vertical spread
Covered call/Covered call writing
Uncovered option/Naked option
Clearinghouse
14. The stock price(s) at which an option strategy results in neither a profit nor a loss.
Break-even point(s)
Leg
Exercise
Time decay
15. At the money
Combination
ATM
Offer price
Carry/Carrying charge
16. The highest price a dealer is willing to pay for a security at a particular time.
Chicago Board Options Exchange (CBOE)
At-the-money
Contract size
Bid/bid price
17. The month during which the expiration date occurs
Expiration month
Fences
Break-even point(s)
Box spread
18. 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
Calendar spread
Box spread
Indexing
Vega
19. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.
Contract size
Bear market
Option writer
Butterfly spead (Put)
20. The simultaneous purchase and sale of options of the same class (call or put - having same underlying) at the same strike prices - but with different expiration dates - selling the short-term option and buying the long-term option.
Rho
In-the-money option (ITM)
Broker loan rate
Calendar spread
21. The interest expense on money borrowed to finance a margined securities position.
Hedging
Clearinghouse
Box spread
Carry/Carrying charge
22. 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.
Bear spread (put)
Options pricing curve
Equivalent strategy
Backspread
23. Commodity trading advisor.
Option writer
Equivalent strategy
CTA
Assignment
24. 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.
Exercise
Cash-settled American index options (cash index)
Option
Ask/ask price
25. 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
Debit spread
Butterfly spread (Call)
Clearinghouse
Calendar spread
26. 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.
Diagonal spread
American-style options
Contract size
At-the-money
27. 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).
Iron butterfly
Call Option
Butterfly spead (Put)
Equivalent strategy
28. Charge levied for the privilege ofborrowing money
Combination
Interest
Assignment
Condor spread
29. A short call position and a long put position.
Synthetic short stock
Spread
Combination
Straddle
30. A long stock position and a short call position.
Synthetic short put
Synthetic Long call
Good til cancel (GTC) order
Synthetic long put
31. An order to buy or sell a security that will remain in effect until the order is executed or canceled
Good til cancel (GTC) order
Selling short
Rho
Options pricing curve
32. A facility that compares and reconciles both sides of a trade in addition to receiving and delivering payments and securities.
Black-Scholes formula
Options pricing curve
Condor spread
Clearinghouse
33. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.
Volatility
Underlying
Assigned
Option writer
34. An option strategy that is neither bullish nor bearish.
Extrinsic value
Neutral strategy
Series of options
Break-even point(s)
35. 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.
Bear spread
Bear market
At-the-money
Future
36. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
ATM
Ask/ask price
Option
Uncovered option/Naked option
37. 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.
Synthetics
Expiration date
Straddle
Butterfly spead (Put)
38. 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
Put-call ratio
Cash-settled American index options (cash index)
Neutral spread
Bear spread
39. Fill-or-kill order
FOK
Out-of-the-money (OTM)
Long position
Fences
40. A facility that compares and reconciles both sides of a trade in addition to receiving and delivering payments and securities.
Break-even point(s)
Selling short
Clearinghouse
Offer price
41. Procedure used by the options clearing corporation to exercise in-the-money options at expiration. (75 cents or more)
Expiration month
Automatic exercise
Bull spread (put)
Black-Scholes formula
42. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.
Contract size
Index
Options pricing curve
Time decay
43. 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)
Ask/ask price
Bull spread (put)
Short stock position
Options pricing model
44. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.
Expiration time
Hedging
Neutral
Synthetic long stock
45. 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.
Class of options
Early exercise
Edge
Extrinsic value
46. Charge levied for the privilege ofborrowing money
Interest
Bear spread (call)
Rho
Adjusted Option
47. The part of an options total price that exceeds its intrinsic value. Price of an out-of-money option consists entirely of time value.
Automatic exercise
Time value
Uncovered option/Naked option
Expiration
48. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.
Butterfly spread
Conversion
Equivalent strategy
Index
49. Good Til Cancel
Bid/bid price
Straddle
GTC
Fences
50. A short stock position and a long call position.
Assignment
Debit spread
Break-even point(s)
Synthetic long put