Options Test Options Knowledge Test Instructions: Answer all 25 questions. Each question is worth 4 points. Total score: 100 points. Attempt Limit: You may take this test up to 3 times using the same email address. Student Name Student Email 1. What does ATM mean in options? At The Money Automated Teller Machine After Trading Market Approved Trading Method 2. What is the underlying asset in options trading? The stock or asset the option is based on The broker’s website The tax form The trader’s password 3. What does time value mean in options? The number of trading apps used Value based on time remaining before expiration The company’s age The time the market opens 4. What is the expiration date? The date the option contract ends The date the stock market closes permanently The date dividends are paid The date the company reports taxes 5. Which factor usually increases an option’s value? Less demand Expired contract status More time before expiration Zero volatility 6. What is implied volatility? The dividend amount The company’s revenue The market’s expectation of future price movement The broker’s fee 7. What is trading volume in options? The expiration price The broker’s commission The company’s annual revenue The number of contracts traded during a period 8. What does liquidity mean in options? How much dividend is paid How long the market is open How much cash a company owns How easily an option can be bought or sold 9. What is extrinsic value? The guaranteed profit The tax value The part of the premium based on time, volatility, and expectations The company dividend 10. What are LEAPS? Options that expire the same day A type of crypto token A broker fee Long-term options with expiration dates far in the future 11. What are weekly options? Options that expire on a weekly schedule Options only for banks Options that pay weekly dividends Options that never expire 12. What does OTM mean? Option Transfer Method Out of The Money Open Trade Market Over The Market 13. Why are liquid options preferable? They always expire ITM They usually have tighter spreads and easier execution They never lose money They remove all risk 14. What does Gamma measure? The number of shares owned How fast time passes Only the bid price How fast Delta changes 15. What does exercising an option mean? Receiving a refund Canceling the option Using the right to buy or sell at the strike price Changing brokers 16. What does ITM mean? Inside The Market Initial Trading Margin In The Money Investment Trade Method 17. What does Vega measure? Time decay Broker margin Sensitivity to implied volatility changes Stock dividends 18. Can options expire? Yes, every option has an expiration date Only Calls expire Only Puts expire No, options last forever 19. Why do options lose value as expiration approaches? Because options become shares Because premiums are refunded Because time value decreases Because stocks stop trading 20. Which Greek is most related to time decay? Delta Theta Rho Gamma 21. One standard stock options contract usually controls how many shares? 50 shares 10 shares 100 shares 1,000 shares 22. When is a Put option considered ITM? When the stock price equals zero When the option expires When the stock price is above the strike price When the stock price is below the strike price 23. What is open interest? The number of company shares only The broker’s interest rate The number of outstanding option contracts The stock dividend 24. What does Theta measure? Stock ownership Open interest Time decay Dividend yield 25. Higher implied volatility generally causes option premiums to: Disappear Stay fixed forever Increase Decrease to zero Submit Test
