Options Trading For Beginners 5

Question 1

What is the 'expiration date' of an option?

Accepted Answer

The last day the option can be exercised

Answer

The expiration date is the final day on which the option holder may exercise the contract.

Question 2

A 'long' position in options means the trader has:

Accepted Answer

Bought the option

Answer

Being long an option means you have purchased it and hold the right it conveys.

Question 3

If you sell a cash-secured put, you should be prepared to:

Accepted Answer

Buy the underlying at the strike if assigned

Answer

A cash-secured put writer may be obligated to buy the stock at the strike if assigned.

Question 4

What is the breakeven for a long call at expiration?

Accepted Answer

Strike price plus premium paid

Answer

A long call breaks even when the stock equals the strike plus the premium paid.

Question 5

Options that share the same underlying, strike, and expiration but differ as call vs put are part of the same:

Accepted Answer

Option chain row

Answer

An option chain lists calls and puts by strike and expiration for a given underlying.

Options Trading Practice Test