Our experts have gathered these Options Trading MCQs through research, and we hope that you will be able to see how much knowledge base you have for the subject of Options Trading by answering these 80+ multiple-choice questions.
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A. Using sophisticated techniques such as Iron Condor
B. Short selling stocks
C. Buying call options and selling after an increase in value
D. Selling naked call options
A. Selling uncovered calls and having the stock price rise
B. Limiting downsize risk while having the most upside potential possible
C. Short selling stocks and having the price of the stock rise
D. Trading options with late expiration dates
A. They help focus in on a specific industry.
B. They guarantee against any losses.
C. They help investors decide when to exit an investment.
D. They are preset criteria that any investment must meet before an investor will consider it a viable investment.
A. When they own options which are out of the money and close to expiration
B. When they are short selling stocks
C. When they have sold substantial amounts of put options
D. When they own deep in the money call options
A. Selling put options
B. Short selling stocks
C. Selling a call option when the underlying stock is not owned
D. Selling a call stock option when the underlying stock is owned
A. Another term for stock
B. A contract to buy or sell a stock at a predetermined price
C. Insurance
D. A contract with your broker to buy and sell stocks
A. Sell off all stock in the worst portfolio.
B. Switch the portfolios around so they all have the same return.
C. Depends on the goals of each portfolio; they could still all be meeting expectations.
D. Do extensive analysis on the stocks.
A. It creates additional risk.
B. They can profit from the sale of options without having to cover them.
C. It guarantees small profits.
D. It forces the market price of the underlying stock up.
A. Because they believe there will be an upward movement in the price but are uncertain of the timing
B. Because they believe there will be an upward price movement but not for six months
C. Because they believe there will be a downward price movement but are uncertain of the timing
D. Because they believe there will be a downward price movement six months from now
A. Selling the underlying stock of an option
B. Holding both a call and a put at the same strike price
C. Watching the market to see what it will do
D. Holding both a call and a put at different strike prices
A. Because they have a longer time horizon to allow for the risky investments to increase over time, and are immune to the short term changes
B. Because they do not know the value of money in the long run
C. Because they have less knowledge and do not know the potential for loss
D. Because there are short term gains to be made
A. Because it is required by law
B. Because it helps in tax planning
C. Because it helps them decide which industry to invest in
D. Because they can match their risk tolerance level with the types of stocks they are purchasing
A. 1
B. 5
C. 20
D. 100
A. Sell call options
B. Buy call options
C. Do nothing
D. Buy both calls and puts to neutralize their position
A. Borrowing money from friends to trade stocks with
B. A stock trading account which allows the holder to borrow money from the broker
C. An account used only for trading options
D. An account which can be used only for trading large cap stocks
A. Fundamental
B. Technical
C. Both Fundamental and Technical
D. Neither Fundamental nor Technical
A. Once per month
B. It is an ongoing process performed during the hours after each day's activity.
C. Never. It does not apply to options.
D. Possibly weekly
A. To look for options priced correctly
B. To look for options which are priced in the market at less than the Black Scholes price
C. To look for options which are not yet written on securities
D. To look for opportunities to sell your options at less than you bought them for
A. Buying a stock, and selling a call at the same time
B. Buying a stock, and selling a put at the same time
C. Selling stock options on securities which are not owned
D. Buying stock options on securities which are not owned
A. When an investor sells a call option and purchases a put option
B. When an investor purchases two call options at different prices
C. When an investor owns both call and put stock options at the same stock price
D. When an investor purchases two put options at different prices
A. Diversifying investment holdings
B. Day trading
C. Purchasing only tech stocks
D. Purchasing stock in the company you work for
A. High
B. Moderate
C. Varies indefinitely
D. Low
A. When the price may move by a small amount
B. When an investor believes there will be a large decrease in the stock price
C. When an investor believes there will be a large increase in the stock price
D. When an investor believes there will be a large stock price movement, but does not know in which direction
A. An options contract which gives the holder the right to buy a stock at a predetermined price
B. A stock which is long
C. An options contract which gives the holder the right to sell a stock at a predetermined price
D. Placing an order to buy options
A. No, they are a commission broker.
B. No, they are a trader looking for short term gains.
C. Yes, they are investing their money.
D. Yes, they are an options investor.
A. Selling two options either put or call
B. Complex trading strategy involving buying two calls and selling two calls
C. Buying two put options at different strike prices
D. Selling only call options on stock you own
A. The price of the option
B. The price at which the trader hopes to sell the option
C. The current trading price of the option
D. The price on an options contract at which the underlying stock can be bought or sold
A. Options that trade in a very narrow band
B. Options which have completely unpredictable pricing
C. Options which have broken the trend
D. Options with near term expiration dates
A. Selling options which expire in the following month
B. Selling options which expire one year from now
C. Selling call options with an expiration of two months from now without owning the underlying stock
D. Selling call options with an expiration of one month from now without owning the underlying stock
A. Because it is illegal to hold it too long
B. To avoid being labeled as a day trader
C. Because he has made too much money already
D. Because he is no longer interested in the classification of stocks
A. Because it makes it easier to manage
B. Because the only way to classify options is by expiration
C. Because options expiring in the near term need to be monitored more actively
D. Because it reduces the tax obligation
A. When expectations are that the market will fall
B. When there is a temporary increase in stock prices
C. When there is a temporary decrease in stock prices
D. When expectations are that the market will rise
A. When a stock price varies drastically
B. When a stock price moves within a relatively narrow band
C. When a stock is losing value quickly
D. When a stock has just had news come out
A. Because it creates an income stream
B. Because it lowers risk in investment
C. Because it creates a return on investment
D. All of the above
A. It lowers the trader's tax obligations.
B. It makes it easier to trade and profit.
C. It takes away all risk.
D. Goals can be set for each portfolio and tracked separately.
A. Nothing specific happens to any one investment; risk mitigation is an overall portfolio tool.
B. The stocks you purchase are guaranteed to increase.
C. It makes for a zero sum game, with no losses or profits.
D. Risk is assigned to someone else.
A. Having a suite of investments to reach a goal while minimizing risk
B. Buying shares all in one industry
C. Actively trading stocks in your portfolio
D. Selling off securities which are not performing
A. Neither one can accurately predict future stock price movements.
B. Both help people make money, the question is which one helps them make more money.
C. The numbers needed are not readily available.
D. There are other strategies which work better.
A. Because new year means companies can restart and forget the past
B. Because management is always more driven
C. Because the year end sales typically bolster profits and increase demand
D. Because employee cuts are made reducing expenses typically after the holidays
A. Because it requires too much time to manage
B. Because they are completely different investment perspectives
C. Because taxes would be excessive
D. Because it would be too difficult to earn a return on any one portfolio
A. Trading risky securities with margin
B. Short selling stock
C. Buying out of the money call options with expirations in the near future
D. Not using margin to trade with
A. Buying a put option for a stock which is currently owned
B. Buying a call option for a stock which is currently owned
C. Short selling stocks
D. Selling put options for a stock which is currently owned
A. By the tax laws which apply
B. By the number of shares outstanding
C. By the time the securities were purchased
D. By the time horizon of the investments contained within it
A. Buying both call and put options on a variety of stocks
B. Applying trading strategies
C. Buying only call options on one stock
D. Selling calls on a security which is owned
A. Daily
B. Continuously, but not daily
C. Yearly
D. Never
A. Financial reports
B. Management reports
C. Past price and volume
D. Market indicators
A. When expectations are that the market will fall
B. When there is a temporary increase in stock prices
C. When there is a temporary decrease in stock prices
D. When expectations are that the market will rise
A. The same as butterfly trading strategy
B. Buying and selling options of two different companies
C. Buying and selling stock options at different strike prices for the same security
D. Selling call options on securities
A. Selling by an options contract holder of their contract
B. An options contract which gives the holder the right to sell the underlying stock at a predetermined price
C. Selling by a stock holder of their stock in order to buy options
D. An options contract which gives the holder the right to buy the underlying stock at a predetermined price
A. Investors are required by tax law to classify their investments into portfolios
B. Investors are required by the SEC to classify their investments into portfolios.
C. Required by accounting laws
D. There is no legal requirement to create portfolios.