The Option Traders Workbook

Question 0

Call delta is always positive or negative?

Answer 0

Positive

Question 1

As the price of the underlying rises, the call delta always __________

Answer 1

Rises

Question 2

Put delta is always positive or negative?

Answer 2

Negative

Question 3

Gamma represents …

Answer 3

The predicted change is delta for a 1-point move in the underlying stock or index

Question 4

Long calls are positive or negative gamma?

Answer 4

Positive

Question 5

Long puts are positive or negative gamma?

Answer 5

Positive gamma

Question 6

Short calls are positive or negative gamma?

Answer 6

Negative gamma

Question 8

Short puts are positive or negative gamma?

Answer 8

Negative gamma

Question 9

Which of the following provides greater leverage?
A. 100 contracts costing $.24/$10 OTM Calls
B 10 contracts costing 2.57 ATM Calls

Answer 9

A, has more potential to improve or deteriorate on a percentage basis than B.

Question 10

Long Call: The difference in leverage between the ATM strikes and the OTM strikes changes as time to Expry decreases. How?

Answer 10

The difference in leverage between two strikes (one OTM and one ATM) widens as expry approaches

Question 11

During most normal IV situations, options that are 25% OTM with only a few days left are __________.

Answer 11

Valueless

Question 12

Which calls will gain more in absolute terms (dollars) on an up move, ATM Calls or OTM Calls on any up move?

Answer 12

ATM Calls

Question 13

Which calls will gain more in percentage terms on an up move, ATM Calls or OTM calls?

Answer 13

OTM calls