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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 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
Neutral spread
Bear
Condor spread
Option writer
2. At the money
Volatility
ATM
Broker/Dealer
Time decay
3. The sensitivity of an option's delta at a given moment in time. It is the change in delta with respect to a 1-point change in the underlying. Examplee (let's say a call option with a 100 strike price has a 50 delta. If the underlying moves from 100 t
Historic volatility
Gamma
Time decay
Break-even point(s)
4. A strategy that profits from a stock price decline. It is initiated by borrowing stock from a broker -dealer and selling it in the open market. This strategy is closed (covered) at a later date by buying back the stock and turning it to the lending b
Synthetic short stock
Option
Expiration month
Short stock position
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.
Call Option
Box spread
Backspread
Time value
6. An option whose underlying asset is an index.
European-style option
Index option
Spread
Synthetic short call
7. 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.
Good til cancel (GTC) order
Adjusted Option
Call Option
Butterfly spread
8. 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]
Time spread/Calendar spread/Horizontal spread
Good til cancel (GTC) order
Indexing
Ask/ask price
9. The sensitivity of an option's delta at a given moment in time. It is the change in delta with respect to a 1-point change in the underlying. Examplee (let's say a call option with a 100 strike price has a 50 delta. If the underlying moves from 100 t
Gamma
Strangle
Ratio write
Synthetics
10. A long call position and a short put position.
Offer price
Neutral spread
Synthetic long stock
Diagonal spread
11. 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.
Butterfly spead (Put)
At-the-money
Black-Scholes formula
Debit spread
12. A spread in which the difference in the long and short options premiums results in a net debit.
Bear spread
Debit spread
Credit spread
Time decay
13. A short stock position and a short put position.
Time spread/Calendar spread/Horizontal spread
Synthetic short call
Bear spread
Contract size
14. 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.
Butterfly spread (Call)
Analytics
Ratio write
Edge
15. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.
Expiration month
Implied volatility
Ask/ask price
Butterfly spead (Put)
16. An option on shares of an individual common stock.
Theta
Equity option
Future
Bid/bid price
17. A strategy consisting of at least two components transacted simultaneously. The price relationship between each part - or 'leg -' could change based on a move in underlying price and or volatility. A spread is entered into with the expectation of eit
In-the-money option (ITM)
Time decay
ATM
Spread
18. The seller of an option contract Who is obligated to meet the terms of delivery if the option is exercised.
Bull spread (call)
Contract size
Class of options
Option writer
19. 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.
Conversion
Synthetic long put
Volatility
Option Chain
20. 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)
Bull spread (call)
Long position
Fences
Exercise
21. 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.
Butterfly spread
Butterfly spead (Put)
Bull (or bullish) spread
Strangle
22. The number of underlying shares covered by one option contract. (100 shares for one equity option)
Pin risk
Synthetic short put
Neutral strategy
Contract size
23. The stock price(s) at which an option strategy results in neither a profit nor a loss.
Bull (or bullish) spread
Interest
Adjusted Option
Break-even point(s)
24. Same as ask price
Strangle
Offer price
Time spread/Calendar spread/Horizontal spread
Last trading day
25. 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.
Series of options
Volatility
Call Option
Conversion
26. Good Til Cancel
All-or-none order (AON)
GTC
Option
Adjusted Option
27. 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)
Interest rate risk
Adjusted Option
Underlying
Option Chain
28. Designated primary market maker.
DPM
Spread
Option writer
Option Chain
29. An order that is designated to be executed on or before the expiration date.
Bid/bid price
All-or-none order (AON)
Offer price
Interest rate risk
30. Charge levied for the privilege ofborrowing money
Synthetic short stock
Class of options
Investment
Interest
31. An option strategy that is neither bullish nor bearish.
In-the-money option (ITM)
Neutral strategy
Series of options
Historic volatility
32. 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.
Bear spread
Synthetic short stock
Rho
Automatic exercise
33. 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)
Bear
Pin risk
Fill-or-kill order (FOK)
Adjusted Option
34. 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.
Butterfly spead (Put)
Long position
Ask/ask price
Bear spread (put)
35. A market drop in the price of a security
reaking
Broker loan rate
Intrinsic value
Time value
36. Designated primary market maker.
Extrinsic value
DPM
Synthetic short stock
Rho
37. A term describing one side of a spread position. A trader who legs into a spread establishes one side first - hoping for a favorable price movement so the other side can be executed at a better price.
Condor spread
Leg
Expiration month
ATM
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
Equivalent strategy
Option
At-the-money
Bear spread
39. 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.
Series of options
Straddle
Extrinsic value
DPM
40. 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
Theoretical value (TV)
Debit spread
Short
Reverse conversion
41. The interest expense on money borrowed to finance a margined securities position.
Market on close (MOC)
In-the-money option (ITM)
Carry/Carrying charge
Call Option
42. A long stock position and a short call position.
European-style option
Gamma
Synthetic short put
GTC
43. 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
Covered option
FOK
Ratio write
Expiration cycle
44. 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
Fences
Uncovered option/Naked option
Exercise
Volatility
45. A long stock position and a short call position.
Break-even point(s)
Synthetic short put
Straddle
Bear spread
46. 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).
Indexing
Hedge/Hedged position
Pin risk
Straddle
47. 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)
Backspread
Bull spread (put)
Synthetics
Bull spread (call)
48. Another name for calendar spread.
European-style option
Horizontal spread
Contract size
Series of options
49. Third Friday of expiration month
Last trading day
Option
All-or-none order (AON)
Investment
50. Long-term equity anticipation securities are calls and puts with expiration's as long as two to three years.
Index option
LEAPS
Bear
Contract size