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. 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






2. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).






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.






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






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






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.






7. Opening sale of a security.






8. Fill-or-kill order






9. The interest expense on money borrowed to finance a margined securities position.






10. The time of day by which all exercise notices must be received on the expiration date.






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






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






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.






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






15. Calculations performed on updated prices.






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






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






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






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.






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.






21. A compilation of the prices of several common entities into a single number; ex (S&P 100 Index).






22. Same as ask price






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






24. An option on shares of an individual common stock.






25. Procedure used by the options clearing corporation to exercise in-the-money options at expiration. (75 cents or more)






26. Another name for calendar spread.






27. An option that can be exercised only at expiration. Usually expire the third Friday of every month






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.






29. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.






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






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






32. An option that has intrinsic value






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






34. Same as ask price






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






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






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






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






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.






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)






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.






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






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






44. The price that an owner of an option can purchase (call) or sell (put) the underlying stock.






45. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.






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).






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






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]






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






50. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.