Chapter 5

Question 1

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

Answer 1

Delta

Question 2

Measures the impact on premium based on the time left for expiry

Answer 2

Theta

Question 3

Rate of change of delta itself

Answer 3

Gamma

Question 4

Rate of change of premium based on change in volatility

Answer 4

Vega

Question 5

Measures the sensitivity of the interest rate of the value

Answer 5

Rho

Question 6

Gives the option holder the right to buy the underlying asset at a particular price which is fixed for that particular time frame

Answer 6

Call option

Question 7

Allows you to buy a given asset at a certain exercise price

Answer 7

Option

Question 8

Is an important variable to understand when entering into an option contract

Answer 8

Contract size

Question 9

In options market an option contract size is ____

Answer 9

Standardized

Question 10

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

Answer 10

Expiry date

Question 11

Is the predermined buying and selling price for the underlying shares if the option is exercised

Answer 11

Exercise price

Question 12

An anchored price at which the two parties agree to enter into an options agreement

Answer 12

Strike price

Question 13

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

Answer 13

Premium

Question 14

Arrived at by the negotiation between the taker an the writer of the option

Answer 14

Premium price

Question 15

Displays the underlying stock price movements using discrete time binomial lattice tree

Answer 15

Binomial model

Question 16

Generally measures the sensitivity of the option price to various paramameters that impact the value of an option.

Answer 16

Option greeks

Question 17

One of the metrics used to measure volatile stocks is called

Answer 17

Beta

Question 18

Helps you determined the possible magnitude of future moves of the underlying stock

Answer 18

Historical volatility

Question 19

What is implied by the current market price and is used with theoritical models

Answer 19

Implied volatility

Question 20

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

Answer 20

Implied volatility

Question 21

Derived by multiplying the stock price by the cumulative standard normal probability distribution function

Answer 21

Black-sholes model

Question 22

Best known option pricing method

Answer 22

Black-sholes model