CADENAS GROUP

Question 1

it allows you to buy a given asset at a certain exercise
price

Answer 1

OPTION

Question 2

it is an important variable to understand when entering into an options contract.

Answer 2

CONTRACT SIZE

Question 3

the day on which all unexercised options in a particular series expire and is the last day of trading for that particular series.

Answer 3

EXPIRY DAY

Question 4

the anchor price at which the two parties (buyer and seller) agree to enter into an option agreement

Answer 4

STRIKE PRICE

Question 5

the money required to be paid by the option buyer to the option seller

Answer 5

PREMIUM

Question 6

is arrived at by the negotiation between the taker and the writer of the option

Answer 6

PREMIUM PRICE

Question 7

is the type of option that gives the option holder (buyer) the right to buy the underlying asset at a particular price which is fixed (strike) for that particular time frame (expiration date).

Answer 7

CALL OPTION

Question 8

type of option that gives the right in the hands of the buyer to sell the underlying security by a particular date for the strike price, but he is NOT obligated to do so.

Answer 8

PUT OPTIONS

Question 9

it displays the underlying stock price movements using a discrete-time binomial lattice (tree) framework

Answer 9

BINOMIAL OPTION PRICING MODEL

Question 10

generally measure the sensitivity of the option price to various parameters that impact the value of an option.

Answer 10

OPTION GREEKS

Question 11

measures the rate of change of options premium based on the directional movement of the underlying

Answer 11

DELTA

Question 12

rate of change of delta itself

Answer 12

GAMMA

Question 13

rate of change of premium based on change in volatility

Answer 13

VEGA

Question 14

measures the impact on premium based on time left for expiry

Answer 14

THETA

Question 15

measures the sensitivity of the interest rate on the value

Answer 15

RHO

Question 16

an option’s time value is also highly dependent on the _______ the market expects the stock to display up to expiration.

Answer 16

VOLATILITY

Question 17

one of the metrics used to measure volatile stocks

Answer 17

BETA

Question 18

measures volatility of a stock when compared to the overall market

Answer 18

BETA

Question 19

helps you determine the possible magnitude of future moves of the underlying stock

Answer 19

HISTORICAL VOLATILITY (HV )

Question 20

is what is implied by the current market prices and is used with theoretical models

Answer 20

IMPLIED VOLATILITY

Question 21

it helps set the current price of an existing option and helps options players assess the potential of a trade

Answer 21

IMPLIED VOLATILITY

Question 22

the one that allows you to acquire the asset at no cost

Answer 22

most valuable option

Question 23

contract size is ______ .

Answer 23

STANDARDIZED

Question 24

is the predetermined buying or selling price for the underlying shares if the option is exercised

Answer 24

exercise price

Question 25

Options have a limited life span and expire on standard expiry days set by Exchange

Answer 25

EXPIRY DATE

Question 26

The best-known options pricing method. The model’s formula is derived by multiplying the stock price by the cumulative standard normal probability distribution function.

Answer 26

THE BLACK-SCHOLES MODEL