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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. 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.
Class of options
Put-call ratio
Straddle
Last trading day
2. Good Til Cancel
GTC
Combination
Time spread/Calendar spread/Horizontal spread
Exercise
3. A short stock position and a long call position.
Synthetic long put
Cash-settled American index options (cash index)
Premium
Condor spread
4. The date an option contract becomes void.
Short stock position
Open interest
Gamma
Expiration
5. The interest expense on money borrowed to finance a margined securities position.
Bear spread (call)
Carry/Carrying charge
Vertical spread
Assignment
6. A list of the options available for the underlying stock symbols in which you are interested.
Debit spread
Clearinghouse
Option Chain
Strike price
7. 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
Expiration cycle
Chicago Board Options Exchange (CBOE)
Expiration date
Cash-settled American index options (cash index)
8. The estimated value of an option derived from a mathematical model.
Theoretical value (TV)
Synthetic short put
Box spread
Vega
9. 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.
Bull
Rho
Future
Assignment
10. 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
Uncovered option/Naked option
Option Chain
Option Chain
11. Opening sale of a security.
Gamma
Equity option
Selling short
Condor spread
12. 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).
Equivalent strategy
At-the-money
Historic volatility
Short stock position
13. A long put butterfly is established by buying one put at the lowest strike price - writing two puts at the middle strike price - and buying one put at the highest strike price.
reaking
Options pricing model
Options pricing curve
Butterfly spead (Put)
14. 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
Premium
Reverse conversion
Offer price
Black-Scholes formula
15. An individual with the opinion that a security - or the market in general will decline in price; someone having a negative or pessimistic outlook.
Uncovered option/Naked option
Bear
Combination
Expiration cycle
16. A long call position and a short put position.
Reverse conversion
FOK
Synthetic long stock
Expiration cycle
17. 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.
Calendar spread
Box spread
Market on close (MOC)
Synthetics
18. Third Friday of expiration month
Neutral spread
Volatility
Last trading day
Bear
19. 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.
Long position
Time value
Ask/ask price
At-the-money
20. An option strategy that is neither bullish nor bearish.
Neutral strategy
Expiration month
reaking
Index
21. 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
Cash-settled American index options (cash index)
Butterfly spread (Call)
Long position
Index
22. Options contracts on the same class having the same strike price and expiration month. (all XYZ May 60 calls constitue a series.
Synthetic long stock
Adjusted Option
Options pricing model
Series of options
23. An open short option position that is offset by a corresponding stock position on a share-for-share basis. This ensures that if the owner of the option exercises - the writer of the option will not have a problem fulfilling the delivery requirements.
Options pricing curve
Leverage
Covered option
Box spread
24. 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
Bear spread (call)
Vertical spread
Strangle
In-the-money option (ITM)
25. 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.
Strangle
Synthetic long stock
Premium
Expiration date
26. An option that has no intrinsic value.
GTC
Underlying
Out-of-the-money (OTM)
Diagonal spread
27. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
Clearinghouse
Break-even point(s)
Ask/ask price
Options pricing model
28. An order that is designated to be executed on or before the expiration date.
Collar
Expiration month
All-or-none order (AON)
Call Option
29. Another name for calendar spread.
Spread
Out-of-the-money (OTM)
Diagonal spread
Horizontal spread
30. A strategy involving four options of the same type that span three strike prices. The strategy has both limited risk and limited profit potential.
Hedging
Adjusted Option
Bid/bid price
Butterfly spread
31. Designated primary market maker.
Covered option
Theta
DPM
Carry/Carrying charge
32. An option on shares of an individual common stock.
Arbitrage
Bull
Black-Scholes formula
Equity option
33. An option whose underlying asset is an index.
Iron butterfly
Arbitrage
Index option
Credit spread
34. An option position that involves the purchase/sale of a call and the sale (purchase of a put on the same underlying strike with the same expiration. Can also be referred to as any set of multiple purchases and sales of options.
Edge
Combination
Hedge/Hedged position
Historic volatility
35. A list of the options available for the underlying stock symbols in which you are interested.
Time spread/Calendar spread/Horizontal spread
Assigned
Option Chain
AON
36. Third Friday of expiration month
Clearinghouse
Options pricing curve
Last trading day
Bear spread
37. Designated primary market maker.
Adjusted Option
Expiration date
Covered option
DPM
38. The total number of outstanding option contracts in a given series
AON
Class of options
Open interest
Hedge/Hedged position
39. An agent who facilitates trades between a buyer and a seller and receives a commission for services.
Series of options
Intrinsic value
Broker/Dealer
Bear spread (call)
40. Received notification of an assignment by rhw options clearing corporation.
Short stock position
Uncovered option/Naked option
Assigned
Investment
41. 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
Adjusted Option
Bear spread (call)
Edge
42. 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)
Theta
Covered call/Covered call writing
Debit spread
Bear spread
43. A prolonged period of falling prices. A bear market in stocks is usually brought on by the anticipation of declining economic activity.
Chicago Board Options Exchange (CBOE)
Option Chain
Credit spread
Bear market
44. An option that has no intrinsic value.
Out-of-the-money (OTM)
Time decay
At-the-money
Long position
45. 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.
Leg
Equivalent strategy
Open interest
Indexing
46. A graphical representation of the estimated theoretical value of an option at one point in time - at various prices of the underlying stock.
Time decay
Theoretical value (TV)
Bull (or bullish) spread
Options pricing curve
47. A contract to buy or sell a predetermined Quantity of a commodity or financial product for a specific price on a given date.
Bear spread
Time decay
Future
Butterfly spead (Put)
48. An agent who facilitates trades between a buyer and a seller and receives a commission for services.
Automatic exercise
Rho
Synthetic short call
Broker/Dealer
49. Options that may be exercised on or before the expiration date.
Put-call ratio
American-style options
Collar
Collar
50. A a feature of American-style options that allows the owner to exercise an option at any time prior to its expiration date.
Neutral spread
Future
Early exercise
Covered option