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series 7 > Unit 10 > Flashcards

Unit 10 Flashcards

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Series 7 Top-off Exam flashcards
1
Q

The point at which gains equal losses

A

Breakeven Point

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2
Q

A US dollar settled option security representing the right to buy or sell a specified amount of a foreign currency

A

Foreign currency option (FCO)

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3
Q

A security representing the right to buy or sell government debt securities

A

Interest rate option

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4
Q

When a portfolio manager buys puts on the index to offset loss of the market value of the stock falls

A

Portfolio insurance

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5
Q

An index designed to reflect the movement of the market as a whole

Ex: S&P 100, 500

A

Broad based index

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6
Q

Where the premium received on the short call is the same amount or higher than the premium paid for the long put

A

Cashless collar

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7
Q

Option strategy generally used to protect an unrealized gain on a long stock position

A

Collar

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8
Q

A blanket term for a number of option strategies involving a put and a call on the same stock at different strike prices, expirations or both

A

Combination

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9
Q

An options investors position of purchasing a call and a put on the same underlying security with the same exercise price and expiration month. The investor is looking for either a rise or fall in the price of the underlying security or futures contract and hopes to avoid a flat market

A

Long straddle

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10
Q

An options investors potions that results from buying a call and a put or selling a call and a put on the same security with the same exercise price and expiration month

A

Straddle

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11
Q

Determined by the option that is more costly of the two- the one with higher premium

A

Market attitude

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12
Q

An option strategy where the premiums paid for buying the long options are more than the premiums received for the short options- a net debit to customer account

A

Debit spread

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13
Q

An option position established by the simultaneous purchase and sale of options of the same class but with different exercise prices and expiration dates

A

Diagonal spread

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14
Q

The purchase and sale of two options on the same underlying security and with the same exercise price but with different expiration dates

Aka: time spread, calendar spread

A

Horizontal spread

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15
Q

The purchase and sale of two options on the same underlying security and with the same expiration date but with different exercise prices

Aka: price spread, money spread

A

Vertical spread

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16
Q
  1. In a quotation, the difference between the bid and ask prices
  2. An options position established by purchasing one option and selling another option of the same class buy of a different series
  3. The price difference between two futures contracts. It involves holding a long and a short position in two or more related futures contracts with the objective of profiting from a change in the price relationship
A

Spread

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17
Q

Reflects the current open interest in the trading of put options to call options. Can be used to gauge investor sentiment and can be calculated to measure broad sectors of the market

A

Put-call ratio

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18
Q

An option hedge position in which the investor writes more than one call option for every 100 shares of underlying stock the investor owns. As a result, the investor has a partly covered position and a partly naked position

A

Ratio call writing

19
Q

An investor who writes a call option without owning the underlying stock or other related assets that would enable the investor to deliver the stock, should the option be exercised

A

Uncovered call writer

20
Q

An investor who sells a put option while owning an asset that guarantees the ability to pay if the put is exercised

A

Covered put writer

21
Q

An investor who sells a call option while owning the underlying security or some other asset that guarantees the ability to deliver if the call is exercised

A

Covered call writer

22
Q

Bearish or neutral investor who wants the market to fall

A

Call writer

23
Q

Bullish investor who wants the market to rise

A

Call buyer

24
Q

Describes an in the money option trading at its intrinsic value

“Equal”

A

Parity

25
Q

Formula for time value

A

Pre - IV

26
Q

The amount an investor pays for an option above its intrinsic value. It reflects the amount of time left until expiration

A

Time value

27
Q

When the market price of the underlying asset is less than the strike price

Advantageous to sellers

A

Out of the money

28
Q

When the market price of the underlying asset equals the strike price

A

At the money

29
Q

When the market price of the underlying asset exceeds the strike price of the option

Buyers want this, sellers do not

A

In the money

30
Q

The potential profit to be made from exercising an option. A call option is said to have this when the underlying stock is trading above the exercise price

A

Intrinsic value

31
Q

What is the settlement date the assigned parties are required to make upon exercise?

A

T + 2

32
Q

The organization that issues options, standardized option contracts and guarantees their performance

A

Options Clearing Corporation (OCC)

33
Q

What is the settlement date for options that are bought and sold?

A

T + 1

34
Q

An options transaction in which the seller buys back an option in the same series; the two transactions effectively cancel each other out and the position is liquidated

A

Closing purchase

35
Q

An options transaction in which the buyer sells an option in the same series; the two transactions effectively cancel each other out and the position is liquidated

A

Closing sale

36
Q

Writer has obligation to buy 100 shares of a specific stock at the strike price if the buyer exercises the contract

A

Short put

37
Q

Buyer owns the right to sell 100 shares of a specific stock at the exercise price if she chooses to exercise. The holder of the option can also sell the option if she desires

A

Long put

38
Q

A call writer has the obligation to sell 100 shares of a specific stock at the strike price if the buyer exercises the contract

A

Short call

39
Q

A call buyer owns the right to buy 100 shares of a specific stock at the exercise price before the expiration if he chooses to exercise. The holder of the option can also sell the option if he desires.

A

Long call

40
Q

Receives premium from buyer

Credit to account when premium is received

Opens their position with a credit

Obligation when contract is exercised

A

Seller, short, writer

41
Q

Pays premium

Debit in account when premium is paid

Opens their position with a debit to their account

Has the right to exercise

A

Buyer, long, holder, owner

42
Q

A contract that represents the right to buy or sell a security or futures contract at a specified time. The purchaser acquired a right and the seller assumes an obligation

A

Option

43
Q

The document a customer must sign within 15 calendar days of being approved for this type of trading. In it, the customer agrees to abide by the rules of exchanges and not to exceed position or exercise limits

A

Option agreement

44
Q

An investment vehicle, the value of which is based on the value of another security. Futures, forwards, swaps and options are among the most common. Generally used by institutional investors to increase overall portfolio return or hedge portfolio risk

A

Derivative

series 7 (12 decks)

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