Test your basic knowledge |

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. Options that may be exercised on or before the expiration date.






2. 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)






3. An order to buy or sell at the last price on the close.






4. 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.






5. 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.






6. The purchase or sale of an equal number of puts or calls with the same underlying - stike price - and expiration.






7. A market drop in the price of a security






8. 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






9. An individual with the opinion that a security - or the market in general will decline in price; someone having a negative or pessimistic outlook.






10. 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






11. An option whose underlying asset is an index.






12. Charge levied for the privilege ofborrowing money






13. 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.






14. 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






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






16. The highest price a dealer is willing to pay for a security at a particular time.






17. The highest price a dealer is willing to pay for a security at a particular time.






18. 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






19. Options that may be exercised on or before the expiration date.






20. 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






21. The part of an options total price that exceeds its intrinsic value. Price of an out-of-money option consists entirely of time value.






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






23. 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)






24. Commodity trading advisor.






25. 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]






26. 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.






27. The estimated value of an option derived from a mathematical model.






28. A contract to buy or sell a predetermined Quantity of a commodity or financial product for a specific price on a given date.






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






30. 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






31. Opening sale of a security.






32. The purchase or sale of an equal number of puts or calls with the same underlying and expiration - but different strike prices.






33. Third Friday of expiration month






34. The degree to which the price of an underlying tends to fluctuate over time. This variable - which the market implies to the underlying - may result from pricing an option through a model.






35. A short stock position and a long call position.






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






37. 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






38. A long stock position and a short call position.






39. The stock price(s) at which an option strategy results in neither a profit nor a loss.






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






41. An agent who facilitates trades between a buyer and a seller and receives a commission for services.






42. 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.






43. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.






44. An option whose underlying asset is an index.






45. 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.






46. An option that has no intrinsic value.






47. A measure of the volatility of the underlying security - derived by applying current prices rather than historical prices.






48. Same as ask price






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






50. An investment strategy used by professional option traders in which a short put and long call with the same strike price and expiration are combined with short stock to lock in a price. (selling short 100 shares of XYZ stock - buying 1 XYZ May 60 cal






Can you answer 50 questions in 15 minutes?



Let me suggest you:

Browse all subjects

Browse all tests

Most popular tests



Major Subjects

Tests & Exams


AP
CLEP
DSST
GRE
SAT
GMAT

Browse all subjects

Browse all tests

Most popular tests