Level 3 Test Flashcards
A long stock is purchased at $60. A short call position is entered with four months to expiration at strike 65. If the stock rises to $65 my overall position will be profit, loss or breakeven?
Overall trade is at a profit
The Bull Put uses which two options instruments:
The Long put and the Short put
A Bear Call uses which of the following trading instruments?
Short Call and Long Call
Reward potential for a credit spread trade is equal to
the net credit
A covered call is defined as…
a short call applied with stock ownership
The Bull Put is a:
Credit trade
The Primary instrument in a Bull Put is:
The short put
If you were to get assigned on your bull put spread trade, what can you do with your long put?
Roll your long put out with a minimum of 45 days in time value
In the Bull Put spread trade the RISK is:
The difference in the strike prices minus the net credit.
How do you calculate a theoretical breakeven on a Bear Call ?
Take the short call strike price and add the net credit
A credit trade means
You get paid to trade, Short options are the primary tool used
When you place a Bull Put, the broker will most likely require that you have enough cash equity to cover the:
Risk of the trade.
How do you calculate the net credit for a bull put?
Subtract the ask price of the long put from the bid price of the short put
A primary exit strategy for credit trades would be to let the options expire worthless.
TRUE
A good secondary exit point for a Bull Put is:
Let the short option be assigned.
