Options Trading Millionaires 3

Question 1

What is the maximum loss on a long call option?

Accepted Answer

The premium paid

Answer

A long call buyer can only lose the premium paid for the option.

Question 2

An iron condor profits most when the underlying stock does what?

Accepted Answer

Stays within a range

Answer

An iron condor is a neutral strategy that profits when price stays between the short strikes.

Question 3

What does 'delta' approximately represent for an option?

Accepted Answer

Change in option price per $1 move in the stock

Answer

Delta estimates how much an option's price moves for each $1 change in the underlying.

Question 4

Why is position sizing critical for traders trying to grow wealth with options?

Accepted Answer

It limits how much one trade can damage the account

Answer

Proper position sizing prevents a single losing trade from devastating the portfolio.

Question 5

A covered call involves owning stock and doing what?

Accepted Answer

Selling a call against the shares

Answer

A covered call sells a call option against owned shares to generate premium income.

Options Trading Practice Test