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In the money means the options has ____ value.
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intrinsic
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The expiration date of all listed equity options is ___.
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10:59 PM Central Time on the Saturday following the third Friday of the expiration month.
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Last Trade of an option is when? What time for Broad Index options?
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3:02 PM Central Standard Time on the third Friday of the expiration month. 3:15 PM CST of the above day.
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Equity Option exercise settlement is ___ ___ ___ after receiving notice.
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3 business days.
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An Option Agreement is a ___ ___of every options customer, similar in purpose to a loan agreement, and ____ days after the account has been approved for options, the firm must have obtained a _______ signed by the customer.
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written approval; 15; Written Account Agreement.
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To figure the two break even prices for straddles and combinations, you ____ the ____ premium to the Call strike price and ____ the ____ premium from the Put strike price.
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add; combinedsubtract; combined
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A short put is covered only when the writer is also long a put of the same ____ with an _____ __ ____ strike price.
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class; equal or greater
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Each option is usually for ___ shares of common stock. But can be more if there was a stock ____ or stock ___.
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100; dividend; split
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A Put buyer has the advantages over a short seller of stock of _____ and ____ ____ .
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1. Leverage: earns the profit with less investment.2. Limited risk: maximum loss is the option premium.
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What is the maximum that the put writer can lose?
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The price of the stock less his premium.
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On a long straddle or combination a profit is realized if the stock price does what?
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moves outside
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What is the most an option writer can make?
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the premium
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Time Value =
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Premium less the Intrinsic Value
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The Exercise Price for Options is fixed at what intervals for the following amounts: 5-25; 25-200; over 200.
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2 1/2 points; 5 points; 10 points.
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When an option is "in the money" it is said to have what?
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intrinsic value
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Time Value = premium minus ____ (if any)
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intrinsic value
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Unlike a Stock Option where actual shares will be exchanged, When an Index Option is exersized, the ________ change hands.
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difference between the strike price and the closing index price
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A ____ or _____ spread is a neutral spread.
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calendar; horizontal
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A capped index option is automatically exercised when _____, and settlement is within ___ business days.
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the index price reaches the capped price; 2
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When the ___ ____ are the same and the ____ are different, it is known as a Vertical or ____ spread.
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expiration dates; prices; price
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Income Equivalent: long stock + short call = ____.
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short put
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The Closing Rotation takes place on the ____ ____ Day prior to _______. Each series is closed in rotation from the ____ and ____ to the ____ and ____.
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last business; expiration; lowest strike price; nearest expiration; highest strike; longest expiration month.
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Each customers account must be specifically approved for ______ ___ prior to the time that the firm accepts an ______ _____ from the customer.
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options trading; options order
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On a Bear Spread the option being purchased has a ____ strike price than the one being sold.
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higher
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A spread is the simultaneous ___ and ____ position in the ____ class of options.
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long; short; same
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Pegging is a form of manipulation that involves both ____ and ____.
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capping; supporting
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The Put-Down Rule for break even is what?
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Long/short puts: Subtract the premium from the strike price.Put spread: Subtract the debit/credit from the higher strike price.
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Open interest is ____ .
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the total number of potentially exercisable contracts that are currently existing in the records of the OCC;
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Calls tend to be worth more in ___ markets. Puts tend to be worth more in ___ markets.
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Bull; Bear
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For tax purposes the holder of a long option that is unexercised on expiration date will treat the loss as a ____ ____.
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capital loss
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Frontrunning is a form of manipulation that involves what?
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Option positions are taken after a firm has recieved a block order on the underlying security but prior to submitting that block order.
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The OCC assigns notice of exercise ____ to a member firm. In turn, how can the firm can assign the notice?
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randomly. Randomly, FIFO, or any other method considered fair.
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Protection: Equivalent: short stock + long call = ____.
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long put
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At any time there are ____ expiration dates available.
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4
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What is the maximum possible profit and loss on a credit spread?
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Profit: the credit.Loss: The difference between the two strike prices less the credit.
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The acronym WED means what?
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WidenExersizeDebit
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The market price of an option is known as the ____ and is always quoted on a ___ ___ basis.
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premium; per share
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Options of the ___ type, and the ____ underlying security belong to the same ____ of options.
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same; same; class
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Capping is a form of manipulation that involves what?
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An options trader with a short call that issues a series of sales orders in an attempt to keep the stock price from rising above the strike price.
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Any option holder who sells his option via a closing sale transaction prior to the expiration date of the option would have a _____ gain/loss.
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capital
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The projected performance in sales literature, among other things, may not base annualized rates of return on less than a ____ ___ time frame.
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60 day
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Out of the money means the option has ____ ____ value.
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no intrinsic
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The "Underlying Yield" in a Yield-Based Maturity is the annualized ____ ____ ___ of the most recently issued treasury security.
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yield to maturity
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The maximum profit and loss on the holder of a long combination is what?
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Profit: UnlimitedLoss: Only the premiums
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The standard expiration cycle is the next _____, and the next _____ following those in the options cycle.
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two months; two months
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The time value is greatest on those options that have the most ______.
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time until expiration.
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The Market Maker/Registered Options Trader (ROT) on the Chicago Board of Options Exchange acts like a _____ on the floor, trading on their own ____ ____ ___.
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dealer; account and risk.
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If a ROT on the Chicago Board of Options Exchange makes a firm quote, they must honor it for the next ___ trades.
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10
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All options positions begin with ______ transactions and are terminated by ____ transactions.
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opening; closing
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If a ____ ____ is declared, an Intra Day Rotation may be intiated. Intra day rotations are also intitiated to ___ the trading of options once trading has been ____.
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fast market; reopen; halted.
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The easiest way to identify a bull spread is the option being purchased has a ____ price than the option being sold.
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lower
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Every morning when the market opens on the Chicago Board of Options Exchange, the OBO calls for ____ ____ ___ from the trading crowd. This is called the ___ ____.
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bids and offers (asks); Opening rotation.
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An investor who purchases a T Bond Put in anticipation of a price decrease is actually anticipating an ____ _____ ____.
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interest rate increase.
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The Aggregate Exercise Price is the ____.
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the price computed by multiplying the strike price by the number of shares in the option.
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In the case of credit spreads, the short position is always ____.
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naked.
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Writing a Covered Call means the Writer has his short position covered by a ownership of the _____ _____ sufficient to cover the call. He doesn't have to have actual ownership if he has a _____ position _____ to cover the obligation to sell the securitie
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underlying stock; long; sufficient
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Leap stands for ___.
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Long-term Equity Anticipation Securities.
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Naked Call Writers have a profit potential that is ______, and a loss potential that is ______.
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the amount of their premium; unlimited
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The acronym NUC means what?
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NarrowUnexercisedCredit
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An investor whose outlook is neutral, would engage in a ____ spread.
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neutral
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The value of a put option will ____ as the price of the underlying stock goes down.
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increase
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When an investor buys a Call option, his potential for profit is _____, his potential for loss is ____.
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unlimited; the premium he paid.
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A straddle or combination buyer needs _____ to profit.
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volatility
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In the Chicago Board of Options Exchange, the Order Book Official is sometimes assisted by the ____ ____, who do what?
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Board BrokersAct like Deputy OBOs and handle the trading rotations.
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What are two reasons why purchasing a call option on a stock would be a more attractive alternative than actually owning the stock?
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1. Leverage: potential for same profit with less investment.2. Reduction in risk: owner of stock could lose more than than the owner of an option.
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The "Yield Indicator" in a Yield-Based Option is the ____ ____ ____ of the most _____ treasury bill x 10.
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Yield to maturity; recent
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A long call and Short Put are equivalent to a ____ ___.
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long stock
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A Writer is synonymous with _____, and _____ him to _____ the stock to a call holder when the holder chooses to exercise.
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seller; obligates; sell
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What is the maximum possible profit and loss on a debit spread.
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Profit: The difference between the strike prices of the two options less the debit.Loss: the debit.
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The four main terms of an Option Contract are?
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1. Underlying Stock.2. Expiration Month3. Excercise/Strike Price4. Type of Option
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On the Chicago Board of Options Exchange (CBOE), the ____ ___ ___ maintains an orderly market.
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Order Book Official (OBO)
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Protection: Equivalent: long stock + long put = ____.
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long call
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The regular way settlement of all listed options trades is the ____ ____ ___.
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next business day
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A short position describes someone who ____ an option.
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has written (sold)
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An Options Disclosure Document (ODD) is the equivalent of a stock _____.
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prospectus
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In the case of a short straddle combination the maximum profit and loss is what?
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Profit: the combined premiums.Loss: Unlimited.
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When a firm approves a customer for options trading it is for one or more _____ types of transactions. Any future change in the ____ of transactions must be _____.
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specific;types;approved in writing
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Call is synonymous with ___.
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buy
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Supporting is a form of manipulation that involves what?
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An options trader with a short put issues a series of buy orders in an attempt to keep the stock price from falling below the strike price.
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Put is synonymous with ____.
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sell
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Call Writing is _____, and the writer is ultimately hoping that ______.
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Bearish; the holder never exercises the option to buy.
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Last Exercise is what date?
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4:30 PM CST on the third Friday of the expiraton month.
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The "Wash Sale" rule says that the IRS will not allow an investor to claim a loss on the sale of a security if ____.
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the purchase a "substantially identical" security either 30 prior to after the sale.
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On a short straddle or combination, a profit is realized if the stock price does what?
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stays inside
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A long position describes someone who ___ an option.
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owns (holds)
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All equity LEAPS can be exercised _____ style, wheras all index LEAPS are exercised ____ style.
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American; European
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In the case of debit spreads, the short position is always ____.
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covered
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The only difference between a Combination and a Straddle is that in a straddle both the put and call are _____, wheras in the combination, at least ____ term is _____.
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identical; one; different.
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A leap can have an expiration date up to _____.
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slightly more than 3 years.
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A Put is an option to have the right to _____ stock at a certain price.
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sell
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Calls are Out-Of-The-Money when the market price is ____ than the strike price. Puts are Out-Of-The-Money when the market price is ____ than the strike price.
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lower; higher
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Among other things, sales literature may include information about past performance provided the material is confined to a specific ______ and covers at least the most recent ____ ____ period.
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universe; 12 month
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An option is considered to be selling at parity when the ____ is equal to its _____.
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premium; intrinsic value
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An option is an unusual security that is actually a _____.
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contract
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On a calendar or horizontal spread, you want to ____ the near and ____ the far.
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sell; buy
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Buying a put and a call on the same underlying stock is known as a ____ ____.
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long combination
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Calls are In-The-Money when the market price is ____ than the strike price. Puts are In-The-Money when the market price is ___ than the strike price.
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higher; lower
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If the premium of the option we are purchasing ____ ____ than the option we are selling it is called a Debit Spread.
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costs more
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Whent the ____ are the same and the ____ ____ are different, it is known as a horizontal or _____ spread.
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prices; expiration dates; calendar
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The Closing rotation begins ____ the underlying security _____ on its principal exchange.
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after; closes
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The Call-Up Rule for break even is what?
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Long/short Calls: Add the premium to the strike price.Call Spread: Add the debit or credit to the lower strike price.
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If the option we are selling brings in a higher premium than the one we are buying it is known as a ___ ____.
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credit spread
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Income Equivalent: short stock + short put = ____.
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short call
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The opening rotation on the Chicago Board of Options Exchange begins after the ____ ____ opens on its principal exchange, starting with the ______ and _____ and continues till all the option's _____ have been opened.
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underlying security;lowest strike price; nearest expiration month;series
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All Yield based options are ____ style, which means they may only be exercised when?
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European; the day before expiration.
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A long put + a short call is equivalent to a ____ ____.
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short stock
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