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

A cash-secured put obligates the seller to buy shares at the strike if assigned.

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

A covered call reaches max profit when the stock is at or above the strike at expiration.

Question 3

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

Accepted Answer

Decline

Answer

A bear put spread profits when the underlying declines toward the lower strike.

Question 4

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

Accepted Answer

Deep in the money near expiration

Answer

Deep in-the-money short options near expiration carry the greatest risk of early assignment.

Question 5

Vega is highest for options that are:

Accepted Answer

At the money with time remaining

Answer

At-the-money options with time until expiration have the greatest sensitivity to volatility.

Options Trading Practice Test