Module 1 Lesson 3

Question 1

What is a Debit?

Answer 1

Money that is paid out from a trading account. Paying

Premium creates a debit.

Question 2

What is a Credit?

Answer 2

Money that is received into a trading account. Collecting Premium creates a credit.

Question 3

What are the two ways to buy and sell?

Answer 3

Buying To Open
Buying To Close
Selling To Open
Selling To Close

Question 4

What is buy to open?

Answer 4

Buying an option (“going long”) to open a brand new position. When you BTO a call, you are creating new market exposure.

Question 5

What is sell to close?

Answer 5

Selling an option to close an existing long position. When you STC, you are eliminating your market exposure, because you are exiting the trade.

Question 6

What is selling an option to open?

Answer 6

Selling an option (“ going short “) to open a brand new position. When you STO a call, you are creating new market exposure.

Question 7

What is buying to close?

Answer 7

Buying an option to close an existing short position. When you BTC, you are eliminating your market exposure, because you are exiting the trade.