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Series 7- Unit 4 Options > Options > Flashcards

Options Flashcards

1
Q

Straddle

A

call and put with same strike price and expiration

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2
Q

Long Straddle

A

Buy a call and a put

want the stock price to rise

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3
Q

Short Straddle

A

sell a call and a put

Want there to be little movement in the stock

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4
Q

Combination

A

a call and a put with different strike prices, exp dates, or both

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5
Q

Price Spread

A

Buy a call and write a call at different prices, with same expirations

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6
Q

Time Spread

A

Buy a call and sell a call with different expirations, but same price

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7
Q

Diagonal Spread

A

Buy a call and sell a call at different prices and expirations

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8
Q

Closing a position

A

selling the options

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9
Q

Designated Primary Market Maker

A

floor trader who is responsible for maintaining a two sided market

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10
Q

Market Makers

A

registered to trade for their own accounts, maintain orderly.

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11
Q

Floor Brokers

A

a firm’s representatives, executing orders on behalf of the firm

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12
Q

Options Position Limits

A

250,000 contract limit (total of long calls and short puts, vice versa)

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13
Q

Options Clearing Corporation

A

standardize, guarantee the performance of, and issue options contracts (designates exp. dates and strike prices)

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14
Q

OCC Options Disclosure Document

A

When customers open an options account:

  • provided at or before the account approval
  • full and fair disclosure
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15
Q

Options Agreement

A

signed by customer before contracts are bought/sold to recognize he/she read the disclosure, understands the risks of options trading and will honor the position limit rules

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16
Q

Registered Options Principal (ROP)

A

designated by firm for compliance and supervisory issues

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17
Q

Married Put

A

buys stock and a put option as a hedge

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18
Q

Call = In the Money

A

Market Price is greater than Strike

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19
Q

Call = At the Money

A

Market Price = Strike

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20
Q

Call = Out of the Money

A

Market Price is less than Strike

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21
Q

Intrinsic Value of Call

A

Market Price - Strike Price

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22
Q

Breakeven of Call

A

Strike Price + Premium

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23
Q

Put = In the Money

A

Market Price is less than Strike Price

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24
Q

Put = At the money

A

Market Price = Strike Price

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25
Q

Put = Out of the Money

A

Market Price is greater than Strike Price

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26
Q

Intrinsic Value of Put

A

Strike Price - Market Price

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27
Q

Breakeve of Put

A

Strike Price + Premium

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28
Q

A put premium goes (Up/Down) when stock price goes down?

A

Goes Up

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29
Q

A call premium goes (Up/Down) when stock price goes down?

A

Goes Down

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30
Q

Put Buyers are Bullish or Bearish

A

Bearish

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31
Q

Call Buyers are Bullish or Bearish?

A

Bullish

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32
Q

Call

A

Buyer (LONG): has right to buy

Writier/Seller (SHORT): obligation to sell

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33
Q

Put

A

Buyer (LONG): has right to sell

Writer/Seller (SHORT): obligation to buy

34
Q

LONG CALL (BULLISH/BEARISH?)

35
Q

SHORT CALL (BULLISH/BEARISH)

36
Q

LONG PUT (BULLISH/BEARISH)

37
Q

SHORT PUT (BULLISH/BEARISH)

38
Q

A Put is Exercised when:

a) the market price > strike price
b) strike price > market price

A

B) Strike Price > Market Price

39
Q

A Call is Exercised when:

a) Market Price > Strike Price
b) Strike Price> Market Price

A

A) Market Price > Strike Price

40
Q

Time value increases/decreases as the expiration date gets closer

41
Q

MAXIMUM GAIN of Long Call?

42
Q

MAXIMUM LOSS of Long Call?

43
Q

MAXIMUM GAIN of Short Call?

A

Premium (for a naked/uncovered call)

44
Q

MAXIMUM LOSS of Short Call?

A

Unlimited (for a naked/uncovered call)

45
Q

MAXIMUM GAIN of Long Put

A

Strike Price - Premium

46
Q

MAXIMUM LOSS of Long Put

47
Q

MAXIMUM GAIN of Short Put

48
Q

MAXIMUM LOSS of Short Put

A

Strike Price - Premium

49
Q

Settlement of Listed Equity Options settles regular way or next business day?

A

Regular Way (3 business days after settlement)

50
Q

Long STOCK/Long PUT STRATEGY
Maximum Gain
Maximum Loss
Breakeven

A

Gain: Unlimited
Loss: (Price Paid for Stock-SP)+Put Premium
Breakeven: Price of Stock + Put Premium

51
Q

Long STOCK/ Short CALL STRATEGY
Max Gain
Max Loss
Breakeven

A

Gain: (SP-Price Paid for Stock)+Premium Received
Loss: Price of Stock - Premium
Breakeven: Price of Stock - Premium Received

52
Q

Short STOCK / Long CALL
Max Gain
Max Loss
Breakeven

A

Gain: Value of Short Sale - Call Premium
Loss: (Strike Price - Short Sale Price) + Call Premium
Breakeven: Short Sale Price - Premium

53
Q

Short STOCK / Short CALL
Max Gain
Max Loss
Breakeven

A

Gain: Premium
Loss: Unlimited
Breakeven: Strike + Premium

54
Q

Collar

A

Long STOCK / Long PUT / Short CALL

Hedge a Long Position with no out of pocket cash

55
Q

Call Spread

A

Long CALL / Short CALL

56
Q

Put Spread

A

Long PUT / Short PUT

57
Q

Debit Call Spread (BULLISH/BEARISH)

A

Bullish (reduces cost of LONG position)

58
Q

Credit Call Spread (BULLISH/BEARISH)

59
Q

Debit Put Spreads (BULLISH/BEARISH)

60
Q

Credit Put Spreads (BULLISH/BEARISH)

61
Q

Debit Spreads (Widening or narrowing of premiums?)

62
Q

Credit Spreads (Widening or narrowing of premiums?)

63
Q

Breakeven of Call Spread

A

Lower Strike Price + (Net Premiums)

64
Q

Breakeven of Put Spread

A

Higher Strike Price - Net Premiums

65
Q

Maximum Gain Debit Spread

A

(Difference between Strike Prices) - Net Debit

66
Q

Maximum Loss Debit Spread

67
Q

Maximum Gain Credit Spread

A

(Difference btwn Strike Prices) - Net Credit

68
Q

Maximum Loss Credit Spread

A

Net Credit

69
Q

In a Call Spread, LOWER/HIGHER strike price has the higher premium?

A

LOWER STRIKE PRICE

70
Q

In a Put Spread, LOWER/HIGHER Strke Price has the higher Premium

A

HIGHER STRIKE PRICE

71
Q

MAXIMUM GAIN of long straddle

72
Q

MAXIMUM LOSS of LOng Straddle

A

SUM of Premiums

73
Q

Maximum LOSS Of Short STraddle

74
Q

MAXIMUM GAIN of Short STraddle

A

SUM of PRemiums

75
Q

CALL & PUT Breakevens of a LONG STRADDLE

A

CALL STRIKE + BOTH PREMIUMS

PUT Strike - BOTH PRemiums

76
Q

CALL & PUT BReakevens of Short STRADDLE

A

Call STRIKE + Both PREMIUMS

PUT STRIKE - BOTH PREMIUMS

77
Q

If you expect a currency to rise in relation to US Dollar, what options?

A

BUY CALLS & Sell PUTS

78
Q

If you expect currency to fall in relation to US Dollar, what options?

A

SELL CALLS & Buy PUTS

79
Q

FX OPTIONS FOR IMPORTERS TO HEDGE

A

BUY CALLS ON FOREIGN CURRENCY

80
Q

FX OPTIONS FOR EXPORTERS TO HEDGE

A

BUY PUTS ON FOREIGN CURRENCY (IF EXPORTING INTO US, CANNOT BUY PUT ON US $, SO BUY CALL ON FOREIGN CURRENCY)

Series 7- Unit 4 Options (1 decks)

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