Options Trading Options Trading Strategy Test 3

Question 1

A protective put is used primarily to:

Accepted Answer

Hedge a long stock position

Answer

Generate income

Answer

Speculate on a crash

Answer

Increase leverage

Question 2

Which Greek measures an option's sensitivity to changes in the underlying price?

Accepted Answer

Delta

Answer

Theta

Answer

Vega

Answer

Rho

Question 3

Theta decay is generally most harmful to which position?

Accepted Answer

Long option buyer

Answer

Short option seller

Answer

Stock holder

Answer

Bond holder

Question 4

A short strangle profits most when the underlying:

Accepted Answer

Trades in a narrow range

Answer

Makes a huge move

Answer

Gaps down

Answer

Splits

Question 5

Rolling an option position typically means:

Accepted Answer

Closing and opening a new expiration or strike

Answer

Exercising early

Answer

Doubling the size

Answer

Hedging with stock

Question 6

A calendar spread profits primarily from:

Accepted Answer

Differing rates of time decay between expirations

Answer

Large directional moves

Answer

Dividend capture

Answer

Interest rate hikes

Question 7

Implied volatility represents the market's expectation of:

Accepted Answer

Future price movement

Answer

Past price movement

Answer

Dividend yield

Answer

Trading volume