Options Test

1. What does ITM mean?

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

2. Why do deep ITM options usually cost more?

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

3. 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

4. What is a long option position?

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

5. Which factor usually decreases an option’s value over time?

Increased demand Time decay More time remaining Higher implied volatility

6. What is the bid-ask spread?

The dividend amount The difference between the highest buyer price and lowest seller price The difference between stocks and bonds The broker’s tax form

7. Why do options lose value as expiration approaches?

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

8. What is the expiration date?

The date the company reports taxes The date the stock market closes permanently The date dividends are paid The date the option contract ends

9. What does assignment mean in options trading?

The option seller is required to fulfill the contract terms The stock becomes worthless The broker cancels the trade The buyer receives homework

10. What does Delta measure?

How much the option price may change when the underlying moves $1 Trading volume Time decay Expiration date

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

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

12. Why are liquid options preferable?

They never lose money They always expire ITM They remove all risk They usually have tighter spreads and easier execution

13. What are weekly options?

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

14. What does OTM mean?

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

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

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

16. What is an options chain?

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

17. What is extrinsic value?

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

18. What is intrinsic value?

The broker commission The dividend payment The real value an option has if it is ITM The number of shares in an account

19. What is trading volume in options?

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

20. What does Theta measure?

Stock ownership Open interest Dividend yield Time decay

21. Which factor usually increases an option’s value?

Zero volatility More time before expiration Expired contract status Less demand

22. Why do far OTM options usually cost less?

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

23. What are LEAPS?

A type of crypto token Long-term options with expiration dates far in the future A broker fee Options that expire the same day

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

100 shares 1,000 shares 10 shares 50 shares

25. What does a Put option give the buyer?

The right to vote The right to sell the underlying asset The right to receive dividends The right to buy the underlying asset