Options Trading Options Trading Strategy Test 4

Question 1

Selling a cash-secured put obligates you to potentially:

Accepted Answer

Buy shares at the strike

Answer

Sell shares at the strike

Answer

Short the stock

Answer

Pay a dividend

Question 2

The maximum profit on a covered call is achieved when the stock:

Accepted Answer

Rises to or above the strike at expiration

Answer

Falls to zero

Answer

Stays flat

Answer

Pays a special dividend

Question 3

A bear put spread is a bet that the underlying will:

Accepted Answer

Decline

Answer

Rise sharply

Answer

Stay flat

Answer

Become more volatile

Question 4

Assignment risk on a short option is highest when the option is:

Accepted Answer

Deep in the money near expiration

Answer

Far out of the money

Answer

Newly opened

Answer

At a low IV

Question 5

Vega is highest for options that are:

Accepted Answer

At the money with time remaining

Answer

Deep in the money

Answer

Expiring today

Answer

Far out of the money

Question 6

A ratio spread differs from a vertical spread because it:

Accepted Answer

Uses unequal numbers of long and short options

Answer

Uses equal numbers of each leg

Answer

Has no short leg

Answer

Requires owning stock

Question 7

Buying a longer-dated option instead of a short-dated one generally gives you:

Accepted Answer

More time for the thesis to play out

Answer

More theta decay

Answer

Lower cost

Answer

Higher gamma