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






2. Charge levied for the privilege ofborrowing money






3. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.






4. 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.






5. 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)






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






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






8. An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.






9. An order that is designated to be executed on or before the expiration date.






10. An order to buy or sell a security that will remain in effect until the order is executed or canceled






11. An option that has no intrinsic value.






12. 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.






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






14. 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)






15. 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)






16. 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.






17. 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.






18. A spread in which the difference in the long and short options premiums results in a net debit.






19. 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.






20. Fill-or-kill order






21. 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






22. An option strategy that is neither bullish nor bearish.






23. 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






24. 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.






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






26. 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.






27. A position that will perform best if there is little or no net change in the price of the underlying stock.






28. 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






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






30. The number of underlying shares covered by one option contract. (100 shares for one equity option)






31. An order that is designated to be executed on or before the expiration date. (all or none)






32. A a feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.






33. The total number of outstanding option contracts in a given series






34. 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)






35. 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)






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






37. 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.






38. A type of order that requires that the order be executed completely or not at all.






39. 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)






40. A position established with the specific intent of protecting an existing position. (an owner of common stock may buy a put option to hedge against a possible stock price decline).






41. A person who believes that a security - or the market in general - will rise in price; a positive or optimistic outlook.






42. A list of the options available for the underlying stock symbols in which you are interested.






43. An option that has no intrinsic value.






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






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






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






47. A facility that compares and reconciles both sides of a trade in addition to receiving and delivering payments and securities.






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






49. The sensitivity of an options theoretical value to a change in implied volatility.






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