Trading Jobs Options Trading Fundamentals

Question 1

What does a 'call option' give the buyer the right to do?

Accepted Answer

Buy shares at the strike price

Answer

Sell shares at the strike price

Answer

Short sell shares at market price

Answer

Receive dividends from the underlying stock

Question 2

What is the maximum loss for a buyer of a put option?

Accepted Answer

The premium paid

Answer

Unlimited

Answer

Strike price minus premium

Answer

Strike price only

Question 3

An option that can be exercised only at expiration is called what type?

Accepted Answer

European-style

Answer

American-style

Answer

Bermudan-style

Answer

Asian-style

Question 4

What is 'intrinsic value' in options terminology?

Accepted Answer

The amount by which an option is in-the-money

Answer

The time value remaining in the option

Answer

The volatility premium built into the price

Answer

The difference between bid and ask prices

Question 5

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

Accepted Answer

Delta

Answer

Theta

Answer

Vega

Answer

Gamma

Question 6

What is the term for selling an option without owning the underlying security?

Accepted Answer

Naked writing

Answer

Covered writing

Answer

Protective writing

Answer

Spread writing