Option Trading Multiple Choice Questions and 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