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. 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.






2. Good Til Cancel






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






4. The date an option contract becomes void.






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






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






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






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






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.






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






11. Opening sale of a security.






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).






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.






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






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.






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






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.






18. Third Friday of expiration month






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.






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






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






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






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.






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






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.






26. An option that has no intrinsic value.






27. The lowest price at which a dealer or trader is willing to sell a tradable instrument at a particular time.






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






29. Another name for calendar 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.






31. Designated primary market maker.






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






33. An option whose underlying asset is an index.






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.






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






36. Third Friday of expiration month






37. Designated primary market maker.






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






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






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






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






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)






43. A prolonged period of falling prices. A bear market in stocks is usually brought on by the anticipation of declining economic activity.






44. An option that has no intrinsic value.






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.






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






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






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






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






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