Option Trading MCQs Quiz Multiple Choice Questions & Answers

1. Extrinsic value is

1. the part of the price of an option that moves with the underlying stock
2. the part of the price of an option that reduces over time
3. the part of the price of an option indicating its built in value
4. the part of the price of an option that you profit from when you buy an option

2. Generally, when the price of a stock decreases

1. delta of short call options inceases
2. delta of short call options decreases
3. delta of long call options increases
4. delta of call options remain unaffected

3. Generally, when the price of a stock rises

1. rho of call options increases
2. delta of call options decreases
3. rho of call options decreases
4. delta of call options increases

4. Intrinsic value is

1. The part of the price of an option that decays over time
2. The part of the price of an option that you get as profit when you buy options
3. The part of the price of an option that indicates it built in value
4. The part of the price of an option that remains stagnant regardless of stock movement

5. Options delta measures the

1. rate of change of a stocks price to changes in the price of the option
2. rate of change of an options price to changes in the implied volatility of the underlying stock
3. rate of change of a stocks price to changes in its implied volatility
4. rate of change of an options price to price changes of the underlying stock

6. Options Gamma measures

1. the rate of change of options price to changes in the price of the underlying stock
2. the rate of change of options volatility to changes in the price of the underlying stock
3. the rate of change of options delta to changes in the price of the underlying stock
4. the level of toxic exposure of an option

7. Options Rho measures

1. the change in the price of an option to changes in interest rate
2. the change in the price of an option to changes in volatility
3. the change in price of an option to changes in implied volatility
4. the change in price of an option to changes in real interest rate

8. Options Theta measures

1. rate of decay of an options extrinsic value on a daily basis
2. rate of decay of an options intrinsic value on a daily basis
3. rate of decay of an options extrinsic value on a monthly basis
4. rate of decay of an options intrinsic value on a monthly basis

9. Options Vega measures

1. the implied volatility of an option
2. the price sensitivity of an option to changes in implied volatility
3. the expected volatility of the underlying stock
4. the price sensitivity of the underlying stock to changes in implied volatility

10. When a stock declares dividends

1. extrinsic value of call options go up
2. intrinsic value of call options go up
3. extrinsic value of call options go down
4. does not affect call options pricing

11. Which of the following position would you most likely put on if a stock is going to go up?

1. Long underlying stock + short out of the money call options
2. Long call option + long put option
3. Long put option + short call option
4. Short underlying stock + long put option

12. Assuming a stock is $10, its $9 strike price call options asking for $1.30 consists of

1. $1 intrinsic value and $0.30 extrinsic value
2. $1 extrinsic value and $0.30 intrinsic value
3. $1.30 worth of extrinsic value
4. $1.30 worth of intrinsic value

13. Assuming a stock is $10, its $9 strike price put option asking for $1.00 consists of

1. $0.70 of extrinsic value and $0.30 of intrinsic value
2. $1.00 of intrinsic value
3. $1.00 of extrinsic value
4. $0.70 of intrinsic value and $0.30 of extrinsic value

14. Which of the following positions are you most likely to put on if a stock is going to go down?

1. Long at the money put options + short out of the money put options
2. Long out of the money put options + short at the money put options
3. Long stock + long out of the money put options
4. Long stock + long out of the money call options

15. Which of the following positions is most likely to have a delta of zero?

1. long at the money call option + short underlying stock
2. Short at the money call option + short underlying stock
3. Short at the money call option + long underlying stock
4. long at the money call option + short at the money put option

16. Which of the following statement is true?

1. The extrinsic value of call options is highest when it is at the money
2. The extrinsic value of call options is highest when it is out of the money
3. The extrinsic value of call options is highest when it is in the money
4. The extrinsic value of call options is inversely proportionate to its intrinsic value

17. Which options order would you use if you wish to write put options?

1. Sell To Close
2. Buy To Open
3. Sell To Open
4. Buy To Close

18. Which options order would you use when you wish to buy call options?

1. Sell To Open
2. Buy To Open
3. Buy To Close
4. None of the above

19. Which options order would you use when you wish to buy put options?

1. Sell To Close
2. Sell To Open
3. Buy To Open
4. Buy To Close

20. Which options order would you use when you wish to write call options?

1. Sell To Open
2. Sell To Close
3. Buy To Open
4. Buy To Close