Options Trading Advanced Options Techniques

Question 1

What is a 'ratio spread' in options trading?

Accepted Answer

Buying one option and selling more than one option at a different strike

Answer

Buying and selling equal numbers of options at different strikes

Answer

Buying two options for every one sold

Answer

Selling a single option against 100 shares of stock

Question 2

What is a 'calendar spread' (also called a 'time spread')?

Accepted Answer

Buying a longer-dated option and selling a shorter-dated option at the same strike

Answer

Buying options across multiple strikes in the same expiration

Answer

Selling options in one month and buying in the next month at different strikes

Answer

A spread created between two different underlying assets

Question 3

What is a 'diagonal spread' in options?

Accepted Answer

Buying a longer-dated option and selling a shorter-dated option at a different strike

Answer

Buying and selling options on the same expiration at different strikes

Answer

Selling options diagonally across multiple assets

Answer

A spread with equal long and short positions at every strike

Question 4

What is a 'synthetic long stock' position in options?

Accepted Answer

Buying a call and selling a put at the same strike and expiration

Answer

Buying calls only without any put positions

Answer

Selling puts to generate income like a dividend stock

Answer

Buying deep ITM calls to simulate stock ownership

Question 5

What is a 'backspread' in options trading?

Accepted Answer

Selling fewer options than you buy, seeking to profit from a large move

Answer

Buying fewer options than you sell to maximize premium income

Answer

A strategy where you reverse a prior spread position

Answer

Selling back-month options and buying front-month options

Question 6

What is the primary advantage of using a 'vertical spread' over buying a single option?

Accepted Answer

It reduces the cost basis and lowers breakeven point

Answer

It increases unlimited profit potential

Answer

It eliminates all theta decay from the position

Answer

It allows the trader to profit from both rising and falling markets