Trading Weekly Options for Income

Question 1

Weekly options:

a) are a new trading vehicle and therefore not liquid
b) are the fastest-growing segment of the derivatives market
c) account for more than 30 percent of all stock option volume
d) both b and c

Answer 1

d) both b and c

Question 2

Weekly options:

a) are a zero-sum game
b) have smaller commissions than long dated options
c) have a different parabolic curve than longer dated serials
d) all of the above

Answer 2

a) are a zero-sum game

Question 3

In order to defeat a zero-sum game, you must:

a) have a large amount of risk capital
b) have low commissions and tight bid offer spreads
c) have more skill than your opponent
d) b and c only

Answer 3

d) b and c only

Question 4

Weekly option credit spreads offer:

a) liquidity
b) opportunity to cash a trade each week as opposed to once a month
c) limited risk limited reward trades with a high percentage of win
d) all of the above

Answer 4

d) all of the above

Question 5

Priceline (PCLN) priced over $1,000 a share is a good candidate for:

a) backspreads 1 × 2 for even
b) outright purchase of a call or put
c) synthetic long or short through a risk reversal
d) all of the above

Answer 5

d) all of the above

Question 6

Facebook (FB) priced under $60 a share is a good candidate for:

a) outright purchase of a call or put
b) backspreads 1 × 2 for even
c) synthetic long or short through a risk reversal
d) all of the above

Answer 6

d) all of the above

Question 7

Apple Inc. (AAPL) priced at $600 a share is a good candidate for:

a) outright purchase of a call or put
b) backspread 1× 2 for even
c) 60/40 credit spread
d) only b and c

Answer 7

d) only b and c

Question 8

Bank of America (BAC) priced at $14 a share is a good candidate for:

a) nothing; there is not enough air (premium) in the balloon
b) backspreads 1 × 2 for even
c) synthetic long or short through a risk reversal
d) 60/40 credit spreads

Answer 8

a) nothing; there is not enough air in the balloon

Question 9

A long or short risk reversal:

a) should be used when there is a lot of air (premium) in the balloon
b) should be used on all stocks priced above $100
c) should never be used on stocks below $100
d) none of the above

Answer 9

a) should be used when there is a lot of air in the balloon

Question 10

Weekly options offer excellent opportunity for:

a) outright buys of calls and puts
b) credit spreads
c) backspreads 1 × 2 for even
d) all of the above

Answer 10

d) all of the above