Options Trading Options Greeks and Risk Management 2

Question 1

At-the-money options typically have a delta close to:

Accepted Answer

0.50

Answer

1.00

Answer

0.00

Answer

0.25

Question 2

Which risk scenario does a long straddle position primarily hedge against?

Accepted Answer

High volatility in either direction

Answer

Rising prices only

Answer

Falling prices only

Answer

Stable sideways markets

Question 3

What is the maximum loss for a buyer of a put option?

Accepted Answer

The premium paid

Answer

The strike price of the option

Answer

Unlimited

Answer

The current price of the underlying

Question 4

Vega is highest for options that are:

Accepted Answer

At-the-money with more time to expiration

Answer

Deep in-the-money with little time left

Answer

Far out-of-the-money with one day to expiry

Answer

In-the-money at expiration

Question 5

Which strategy is best described as 'selling volatility'?

Accepted Answer

Short straddle

Answer

Long straddle

Answer

Long call

Answer

Long put

Question 6

If an option has a gamma of 0.05 and delta of 0.40, after a $1 rise in the underlying, the new delta will be approximately:

Accepted Answer

0.45

Answer

0.35

Answer

0.50

Answer

0.40