Options Test

1. Why are options often expensive before major news events?

Because implied volatility is usually higher Because they cannot expire Because premiums are fixed Because brokers set all prices manually

2. When is a Call option considered ITM?

When the stock price is below the strike price When the stock price is above the strike price When the option has no buyer When the premium is zero

3. What does liquidity mean in options?

How much cash a company owns How much dividend is paid How easily an option can be bought or sold How long the market is open

4. What is implied volatility?

The company’s revenue The market’s expectation of future price movement The dividend amount The broker’s fee

5. What can happen with wide bid-ask spreads?

Contracts never expire Traders may pay more to enter and receive less to exit Trades become free Premiums are guaranteed

6. 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

7. One standard stock options contract usually controls how many shares?

100 shares 1,000 shares 50 shares 10 shares

8. What is the primary advantage of buying options instead of shares?

Options never expire Options have no risk Options can provide leverage with less upfront capital Options always pay dividends

9. What is an options chain?

A list of company employees A password list A table showing available option contracts A dividend calendar

10. Higher implied volatility generally causes option premiums to:

Increase Stay fixed forever Decrease to zero Disappear

11. Why do far OTM options usually cost less?

They have a lower probability of expiring ITM They are guaranteed to profit They never expire They contain more intrinsic value

12. What are weekly options?

Options that expire on a weekly schedule Options that pay weekly dividends Options that never expire Options only for banks

13. What is Theta decay?

The loss of option value as expiration approaches The increase in shares owned A type of stock split A broker commission

14. What is extrinsic value?

The guaranteed profit The company dividend The part of the premium based on time, volatility, and expectations The tax value

15. What does Vega measure?

Broker margin Stock dividends Sensitivity to implied volatility changes Time decay

16. What does OTM mean?

Option Transfer Method Over The Market Out of The Money Open Trade Market

17. What happens when an option expires worthless?

The buyer loses the premium paid The premium is refunded The buyer receives free shares The contract renews automatically

18. Why do deep ITM options usually cost more?

They cannot expire They have no value They are always free They have more intrinsic value

19. Which Greek measures directional exposure?

Theta Delta Vega Rho

20. Which Greek is most related to time decay?

Theta Delta Rho Gamma

21. What is a long option position?

Owning a bond Buying an option contract Opening a bank account Selling stock short

22. What is an option premium?

A stock dividend A broker bonus The price paid to buy the option contract A government fee

23. Why do options lose value as expiration approaches?

Because stocks stop trading Because time value decreases Because options become shares Because premiums are refunded

24. What does ITM mean?

Initial Trading Margin Investment Trade Method Inside The Market In The Money

25. What is trading volume in options?

The expiration price The number of contracts traded during a period The broker’s commission The company’s annual revenue