A put option is a contract to buy an asset at a set price and date

What happens to the value of an options contract as it approaches expiration?

It can increase or decrease depending on market conditions

Ways to Make Money With Options?

Buying and selling options through arbitrage, speculation, or hedging.

What is the benefit of having a lower strike price in a call option?

It decreases the chances of the option expiring in the money

How does the bid price and ask price relate to the premium?

The ask price is always higher than the bid price and premium

What is the benefit of having a higher strike price in a put option?

It increases the chances of the option expiring in the money

What is a strike price in options trading?

The price at which the holder of an option can buy or sell the stock

What is the expiration date for an options contract?

The date when the option can no longer be exercised

Just bought a call, how will I make money?

Price of the underlying asset has risen in a good amount of time.

What happens to an options contract when it expires?

The contract is terminated and can no longer be exercised

What's a Call Option?

A call option is a contract to buy an asset at a set price and date

What does OTM,ITM,ATM mean?

Out of The Money, In The Money, At The Money

What is the benefit of having a longer expiration date for an options contract?

It gives the holder more time to make a decision on exercising the option

Just bought a put, how will I make money?

Price of the underlying asset is falling within a good timeframe.

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Quiz #1

18 termsStudBud Administration216 plays

These are the basics of what an option contract contains. Geared toward helping you know exactly what you are buying so when we get to the fun part (Technical Analysis, Psychology) You will know what's going on.

Flashcards18 cardsFPractice quizPHost liveL

Questions 18

Answers

1
What's a Put Option
A put option is a type of loan that must be paid back.
A put option is a type of insurance that covers damages to a car.
A put option is a contract to buy an asset at a set price and date
A put option is a type of stock that can only be sold at a certain price.
2
What happens to the value of an options contract as it approaches expiration?
It decreases
It can increase or decrease depending on market conditions
It increases
It stays the same
3
Ways to Make Money With Options?
Buying and selling options is a quick way to get rich by gambling.
Buying and selling options through arbitrage, speculation, or hedging.
Buying and selling call options is a guaranteed way to make a profit.
You can make money by buying options and holding onto them indefinitely.
4
What is the benefit of having a lower strike price in a call option?
It increases the chances of the option expiring out of the money
It has no effect on the chances of the option expiring in the money
It increases the chances of the option expiring in the money
It decreases the chances of the option expiring in the money
5
How does the bid price and ask price relate to the premium?
The bid price is always higher than the ask price and premium
The premium is always the same as the bid price
The ask price is always higher than the bid price and premium
The premium is always the same as the ask price
6
What is the premium in options trading?
The profit made by the trader
The price of the underlying asset
The difference between the strike price and the expiration date
The price of the option itself
7
What is the benefit of having a higher strike price in a put option?
It increases the chances of the option expiring in the money
It has no effect on the chances of the option expiring in the money
It decreases the chances of the option expiring in the money
It increases the chances of the option expiring out of the money
8
What is a strike price in options trading?
The price at which the holder of an option can buy or sell the stock
The price at which a stock can be purchased
The price at which an option expires
The price at which a stock can be sold
9
Stocks have unique characteristics that affect their pricing and volatility of their options contracts
False
True
10
What is the expiration date for an options contract?
The date when the option can be exercised
The date when the option can no longer be exercised
The date when the underlying asset will be delivered
The date when the option is first issued
11
Just bought a call, how will I make money?
Price of the underlying asset has risen in a good amount of time.
You have to hold onto the option until it is exercised.
You have to wait until the expiration date to make a profit.
The underlying stock has to decrease in value for you to make money.
12
What happens to an options contract when it expires?
The contract is sold to another trader
The contract is renewed automatically
The contract is terminated and can no longer be exercised
The contract is converted into a futures contract
13
What factors can affect the premium for an options contract?
The price of the underlying asset
The expiration date
The strike price
All of the above
14
What's a Call Option?
A call option is a type of loan
A call option is a type of investment vehicle that allows borrowing money.
A call option is a contract to buy an asset at a set price and date
A call option is a type of derivative for speculating on commodity prices.
15
If I have a $55 CALL strike price for my options contract. What is the correct ITM,OTM,ATM numbers?
ITM: $55 OTM: $50 ATM: $60
ITM: $50 OTM: $60 ATM: $55
ITM: $60 OTM: $50 ATM: $55
16
What does OTM,ITM,ATM mean?
Out of The Money, In The Money, At The Money
Out of The Market, In The Market, At The Moment
Out of Time Management, In Time Management, At The Mall
Out of Trade Market, In The Money Market, At The Meeting
17
What is the benefit of having a longer expiration date for an options contract?
It increases the chances of the option expiring in the money
It has no effect on the chances of the option expiring in the money
It decreases the chances of the option expiring in the money
It gives the holder more time to make a decision on exercising the option
18
Just bought a put, how will I make money?
The expiration date has to be reached to make a profit.
The underlying stock has to increase in value for you to make money.
Price of the underlying asset is falling within a good timeframe.
You have to hold onto the option until it is exercised to make a profit.

Quiz #1 Flashcards | StudBud

Quiz #1

18 termsStudBud Administration216 plays

Flashcards18 cardsFPractice quizPHost liveL

Questions 18

Answers

1
What's a Put Option
A put option is a type of loan that must be paid back.
A put option is a type of insurance that covers damages to a car.
A put option is a contract to buy an asset at a set price and date
A put option is a type of stock that can only be sold at a certain price.
2
What happens to the value of an options contract as it approaches expiration?
It decreases
It can increase or decrease depending on market conditions
It increases
It stays the same
3
Ways to Make Money With Options?
Buying and selling options is a quick way to get rich by gambling.
Buying and selling options through arbitrage, speculation, or hedging.
Buying and selling call options is a guaranteed way to make a profit.
You can make money by buying options and holding onto them indefinitely.
4
What is the benefit of having a lower strike price in a call option?
It increases the chances of the option expiring out of the money
It has no effect on the chances of the option expiring in the money
It increases the chances of the option expiring in the money
It decreases the chances of the option expiring in the money
5
How does the bid price and ask price relate to the premium?
The bid price is always higher than the ask price and premium
The premium is always the same as the bid price
The ask price is always higher than the bid price and premium
The premium is always the same as the ask price
6
What is the premium in options trading?
The profit made by the trader
The price of the underlying asset
The difference between the strike price and the expiration date
The price of the option itself
7
What is the benefit of having a higher strike price in a put option?
It increases the chances of the option expiring in the money
It has no effect on the chances of the option expiring in the money
It decreases the chances of the option expiring in the money
It increases the chances of the option expiring out of the money
8
What is a strike price in options trading?
The price at which the holder of an option can buy or sell the stock
The price at which a stock can be purchased
The price at which an option expires
The price at which a stock can be sold
9
Stocks have unique characteristics that affect their pricing and volatility of their options contracts
False
True
10
What is the expiration date for an options contract?
The date when the option can be exercised
The date when the option can no longer be exercised
The date when the underlying asset will be delivered
The date when the option is first issued
11
Just bought a call, how will I make money?
Price of the underlying asset has risen in a good amount of time.
You have to hold onto the option until it is exercised.
You have to wait until the expiration date to make a profit.
The underlying stock has to decrease in value for you to make money.
12
What happens to an options contract when it expires?
The contract is sold to another trader
The contract is renewed automatically
The contract is terminated and can no longer be exercised
The contract is converted into a futures contract
13
What factors can affect the premium for an options contract?
The price of the underlying asset
The expiration date
The strike price
All of the above
14
What's a Call Option?
A call option is a type of loan
A call option is a type of investment vehicle that allows borrowing money.
A call option is a contract to buy an asset at a set price and date
A call option is a type of derivative for speculating on commodity prices.
15
If I have a $55 CALL strike price for my options contract. What is the correct ITM,OTM,ATM numbers?
ITM: $55 OTM: $50 ATM: $60
ITM: $50 OTM: $60 ATM: $55
ITM: $60 OTM: $50 ATM: $55
16
What does OTM,ITM,ATM mean?
Out of The Money, In The Money, At The Money
Out of The Market, In The Market, At The Moment
Out of Time Management, In Time Management, At The Mall
Out of Trade Market, In The Money Market, At The Meeting
17
What is the benefit of having a longer expiration date for an options contract?
It increases the chances of the option expiring in the money
It has no effect on the chances of the option expiring in the money
It decreases the chances of the option expiring in the money
It gives the holder more time to make a decision on exercising the option
18
Just bought a put, how will I make money?
The expiration date has to be reached to make a profit.
The underlying stock has to increase in value for you to make money.
Price of the underlying asset is falling within a good timeframe.
You have to hold onto the option until it is exercised to make a profit.