Options Trading Cheat Sheet 2026

The 30 highest-yield Options Trading facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. Which Greek becomes most significant for long-dated options (LEAPS)? → Rho
2. What is a 'poor man's covered call' (PMCC)? → Buying a long-dated ITM call (LEAPS) and selling a short-dated OTM call against it
3. A trader buys a call and sells a higher-strike call on the same stock and expiration. What is this called? → Bull call spread
4. Which strategy is best described as 'selling volatility'? → Short straddle
5. Why do experienced traders often sell options when implied volatility is high? → Premiums are inflated and likely to contract
6. What does a high implied volatility (IV) indicate about an option's premium? → The premium is more expensive
7. What model is most commonly used to price European-style options? → Black-Scholes model
8. What does 'assignment' mean for an option seller? → Being required to fulfill the option's obligation
9. The maximum return on investment for equity option contracts is : → Limited
10. What is 'open interest' in the options market? → The total number of outstanding options contracts that have not been settled
11. Which Greek measures an option's sensitivity to changes in implied volatility? → Vega
12. What is the breakeven price for a cash-secured put with a $50 strike and $3 premium collected? → $47
13. Selling a cash-secured put obligates you to potentially: → Buy shares at the strike
14. Why might a trader 'roll' an option position? → To extend time or adjust strikes and avoid assignment
15. If you are assigned on a naked (uncovered) short call and do not own the underlying shares, what position does your account now hold? → Short 100 shares of the underlying stock
16. What is the ideal market condition for selling iron condors? → Low volatility with the underlying expected to stay in a range
17. Why do many traders avoid holding options through earnings announcements? → Implied volatility crush can erase premium
18. A bear put spread is a bet that the underlying will: → Decline
19. Which best describes why beginners often start with long calls and puts? → Risk is limited to the premium paid
20. Theta decay is generally most harmful to which position? → Long option buyer
21. Choosing the strike price ________. → At the time the deal was signed
22. What does 'IV rank' measure in options trading? → Where current IV sits relative to its 52-week range
23. Which type of option can only be exercised at expiration? → European-style option
24. Which scenario causes time decay (theta) to accelerate most rapidly? → As expiration approaches
25. What is a 'broken wing butterfly' spread? → A butterfly spread where the wings are unequal in width to reduce cost or create a credit
26. What is the role of the Options Clearing Corporation (OCC) in the U.S. options market? → It acts as the central counterparty guaranteeing all options contracts
27. Which Greek measures an option's sensitivity to interest rate changes? → Rho
28. An option trading at its intrinsic value only (zero time value) is said to be: → Deeply in the money
29. The intrinsic value of a call option is: → Stock price minus strike, if positive
30. The breakeven point of a long put is calculated as: → Strike minus premium