Options Trading Options Trading Strategy Test 3

Question 1

A protective put is used primarily to:

Accepted Answer

Hedge a long stock position

Answer

A protective put hedges a long stock position by setting a floor on potential losses.

Question 2

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

Accepted Answer

Delta

Answer

Delta measures how much an option's price moves per $1 change in the underlying.

Question 3

Theta decay is generally most harmful to which position?

Accepted Answer

Long option buyer

Answer

Theta erodes the value of long options over time, hurting the buyer as expiration nears.

Question 4

A short strangle profits most when the underlying:

Accepted Answer

Trades in a narrow range

Answer

A short strangle collects premium and profits when the underlying stays within a range.

Question 5

Rolling an option position typically means:

Accepted Answer

Closing and opening a new expiration or strike

Answer

Rolling closes the current option and opens a new one at a different strike or expiration.

Options Trading Practice Test