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Series 7 OT > Options > Flashcards

Options Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Breakeven point for a Call spread

A
  • Work out premium difference

- Add lower strike price

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2
Q

Breakeven point for a Put spread

A
  • Work out premium difference

- Subtract higher strike price

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3
Q

Covered call

A

When you own the stock and sell a call option - for protection

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4
Q

Brekeven for Call straddle

A
  • Work out premiums

- Add to strike

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5
Q

Breakeven for Put straddle

A
  • Work out premium

- Minus the strike

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6
Q

Intrinsic value

A

Difference between market price and strike price

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7
Q

Call buyers want stock to go

A

Up

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8
Q

Put buyers want stock to go

A

Down

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9
Q

Call sellers want stock to go

A

Down

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10
Q

Put sellers want stock to go

A

Up

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11
Q

Buying Calls =

A

Right to buy

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12
Q

Buying Puts =

A

Right to sell

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13
Q

Selling Calls =

A

Obligation to sell

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14
Q

Selling Puts =

A

Obligation to buy

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15
Q

An insurance policy against falls in price

A

Buying puts

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16
Q

When closing an option, the gain / loss is the difference between:

A

the premiums paid

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17
Q

A Call option

A

The option to Buy

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18
Q

A Put option

A

The option to Sell

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19
Q

Sells are obligations

A

Buys are rights

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20
Q

If you buy a call you want it to go up.

A

if you buy a put, you want it to go down

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21
Q

Debit (bear) spread is a net buy

A

Credit (bull) spread is a net sell

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22
Q

Beakeven for Calls

A

Total premiums + Strike lower price

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23
Q

Beakeven for Puts

A

Total premiums minus Strike price

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24
Q

Calender spread

A

Buy near expiratoin. Sell distant expiratoin

25
Q

Long Straddle

A

Buying a call and buying a put with same strike price and expiratoin

26
Q

Short Straddle

A

Selling a call and selling a put with the same strike and expiratoin

27
Q

Long Puts are in the money when

A

The stock trades below the Strike price

28
Q

Long Calls are in the money when

A

The stock trades above the Strike price

29
Q

Spreads

A

Work out the difference between the ask prices

30
Q

Bullish

A

Buy calls

Sell puts

31
Q

Bearish

A

Sell calls
Buy puts
Call spreads

32
Q

Straddles are good when

A

Market is stable or when you are unsure of direction

33
Q

FX options

A

Traded any time but only exercised at expiration

34
Q

Debit spread

A

Investors profit if it widens

35
Q

Debit spread

A

Investors profit if it widens or both sides excersize

36
Q

Credit spread

A

Investors profit if it narrows or both sides expire

37
Q

To protect short positions

A

Use long calls

38
Q

If there is no intrinsic value and the stock value is worthless ..

A

The writer (seller) profits.

39
Q

Gain =

A

Difference between the purchase price and strike

- minus premium

40
Q

Combos and straddles have TWO break even points

A

Add the premiums together to the call price. subtract from the put price

41
Q

50% stock dividend = 50% more shares.

A

Divide total by new amount

42
Q

Cost of establishing spreads is SIMPLE.

A

One premium less the other premium

43
Q

Maximum loss on short calls.

A

Share price minus the premium collected, multimplied by number of shares

44
Q

European style executions - last day of trading.

A

US - can be any

45
Q

Put Debit Spreads are profitable when:

A
  • Spreads widen

- Excersized

46
Q

Put Credit Spreads are profitable when:

A
  • Spreads narrow

- Expire

47
Q

Using yield-based options

A

Buy 30 yr T bond calls

48
Q

Intrinsic Value

A

Strike price minus Stock price

49
Q

When calculating intrinsic value

A

Dont count the premium

50
Q

Straddles:

A

Work out intrinsic value plus or mins the premiums

51
Q

In the money (intrinsic value)

A

Market price plus or minus strike price

52
Q

Measure break even on call spread

A

Adding the difference between premiums to the lower strike price

53
Q

Measure break even on a put spread

A

Subtracting the difference between premiums from the higher strike price

54
Q

If you write more calls than you can cover

A

You will be fucked

55
Q

Max loss in credit spread

A

The difference between the strikes the total premiums.

56
Q

Max gain in credit spread

A

The total of premiums

57
Q

Max gain in debit spread

A

The difference between the strikes and total premiums

58
Q

Max loss in debit spread

A

The total of premiums

Series 7 OT (15 decks)

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