CDP CDP Trading Strategies & Execution

Question 1

What is a 'long straddle' options strategy?

Accepted Answer

Buying both a call and put at the same strike price and expiration

Answer

Selling both a call and put at the same strike price

Answer

Buying a call at a higher strike and put at a lower strike

Answer

Selling a call and buying a put at different strikes

Question 2

What is the primary purpose of a 'collar' options strategy?

Accepted Answer

To protect a long stock position against downside while capping upside

Answer

To maximize upside gains

Answer

To speculate on volatility

Answer

To generate unlimited income from premiums

Question 3

In futures trading, what does 'rolling over' a contract mean?

Accepted Answer

Closing a near-term contract and opening a longer-dated one to maintain exposure

Answer

Closing a futures position at a loss

Answer

Converting a futures contract to a spot position

Answer

Adding margin to an existing position

Question 4

What is a 'bull call spread'?

Accepted Answer

Buying a call at a lower strike and selling a call at a higher strike

Answer

Buying calls at two different expiration dates

Answer

Selling a call and buying a put at the same strike

Answer

Buying a call and selling a put at different strikes

Question 5

What is 'basis risk' in futures hedging?

Accepted Answer

The risk that the difference between the spot price and futures price changes unexpectedly, reducing hedge effectiveness

Answer

The risk that futures prices move in the opposite direction to spot prices

Answer

The risk of margin calls exceeding available capital

Answer

The risk that a counterparty defaults on a futures contract

Question 6

Which order type guarantees execution but not price in derivatives trading?

Accepted Answer

Market order

Answer

Limit order

Answer

Stop-limit order

Answer

Good-till-canceled order