Option Trading Multiple Choice Questions and Answers

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