Stock Broker Options Trading & Strategies 3

Question 1

A long straddle strategy involves:

Accepted Answer

Buying both a call and a put with the same strike price and expiration date

Answer

Selling both a call and a put at the same strike price and expiration

Answer

Buying a call and selling a put at different strikes

Answer

Buying a call at one strike and a put at a lower strike

Question 2

A bull call spread is constructed by:

Accepted Answer

Buying a lower-strike call and selling a higher-strike call on the same stock

Answer

Buying a higher-strike call and selling a lower-strike call

Answer

Selling two calls at different strike prices

Answer

Buying a call and buying a put at the same strike price

Question 3

What does the options Greek 'delta' measure?

Accepted Answer

The rate of change in an option's price for a $1 move in the underlying stock

Answer

The sensitivity of an option's price to changes in implied volatility

Answer

The rate at which an option loses time value per day

Answer

The change in delta for a $1 change in the underlying stock price

Question 4

Which options position offers theoretically unlimited profit potential with a limited, defined maximum loss?

Accepted Answer

Long call

Answer

Short put

Answer

Covered call

Answer

Short straddle

Question 5

One standard U.S. equity options contract typically covers how many shares of the underlying stock?

Accepted Answer

100 shares

Answer

10 shares

Answer

1,000 shares

Answer

50 shares

Question 6

What is the breakeven point for a buyer of a call option at expiration?

Accepted Answer

The strike price plus the premium paid

Answer

The strike price minus the premium paid

Answer

The current market price of the stock at purchase

Answer

The premium paid divided by the number of shares in the contract

Question 7

LEAPS (Long-term Equity Anticipation Securities) are options with expiration periods of:

Accepted Answer

More than 9 months, typically up to 3 years

Answer

Up to 3 months

Answer

Exactly 6 months

Answer

Up to 9 months