Options and Derivatives Flashcards
6 cards from real SIE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Options and Derivatives flashcards as text
Which of the following is a characteristic of exchange-traded options?
Answer: Standardized contracts with set strike prices and expirations
Exchange-listed options are standardized contracts with fixed strike prices, expiration dates, and contract sizes.
A protective put strategy involves:
Answer: Buying a put option to hedge against a decline in owned shares
A protective put combines long stock with a long put option, limiting downside risk while maintaining upside potential.
The Options Disclosure Document (ODD) titled 'Characteristics and Risks of Standardized Options' must be provided to customers:
Answer: Before or at the time of opening an options account
FINRA rules require the ODD be provided to customers before or at the time they open an options trading account.
Delta in options pricing measures:
Answer: The rate of change in option price per $1 change in the underlying asset
Delta measures how much an option's price changes for every $1 move in the underlying security's price.
What is the maximum gain for a seller (writer) of a put option?
Answer: The put premium received
The maximum profit for a put writer is the premium collected upfront, achieved when the put expires worthless.
A long straddle position is profitable when the underlying stock:
Answer: Moves significantly in either direction
A long straddle (buying both a call and put at the same strike) profits from large price moves in either direction.