Options for Beginners

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Options Basics

What is an options contract?

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a stock

a commodity

a choice

control of an underlying asset

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What do options offer an investor?

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the right to ask for money

time shares

the right to buy or sell an underlying asset

a period of time

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What kind of risk do options offer?

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a defined risk

no risk

no reward

low risk

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An options call is?

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a bet that the price will decrease

a bet that the price will remain neutral

a bet that the price will increase

none of the above

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An options put is?

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a bet that the price will increase

a bet that the price will decrease

a bet that the price will remain neutral

all of the above

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An options contract gives the buyer of the contract control of?

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control of a car

control of 100 shares of the underlying asset

control of the market

control of 50 shares of the underlying asset

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A put option increases in value when the underlying asset's price

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increases

remains the same

decreases

all of the above

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The expiration day of a contract is?

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the price of a contract

the set time that the contract is valid

the amount of time to trade

the price paid for the contract

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What is an option's premium?

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the time to control a contract

the price of the underlying asset

the price paid for the contract

the price of a car

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What is the strike price?

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the set price at which a contract can be exercised

the price paid for the contract

the price of the stock

a limited time offer

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It is August 25 and an investor buys a call option contract with a $50 strike price and an expiration date of September 3 while the underlying assets price is at $45. By August 30 the underlying asset's price is trading at $60, what are the contract owner's options?

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none

exercise the contract and purchase the underlying asset at $45 a share

sell the contract for a higher premium

both B and C

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In The Money call options are contracts which strike price is below the current market price?

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True

False

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Out Of The Money put options are contracts which strike price is below current market price?

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True

False

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If an investor buys 5 contracts with a premium of .25, what will be the total price paid for the contracts?

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$1.25

$25

$250

$125

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Which of the following is not an options Greek?

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Gamma

Delta

Alpha

Vega

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Assuming that everything remains constant, how much will an options contract with a Theta of .25 lose in value in 4 days?

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.50

2.00

1.00

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Implied Volatility (IV) increases in Bull Markets?

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True

False

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Higher IV means higher premiums?

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True

False

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What is open interest?

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the annual percentage rate paid by an investor

the amount of contracts currently open

the premium interest rate

none of the above

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Which is the Greek that represents the underlying asset's probability of being ITM?

5 points

Delta

Theta

Gamma

Vega

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