September 19, 2020 07:04 PM RSS
Investor Education
 [  |  |  |  |  |  ]
 
 

1. If you open a "cash account" then all stock trades must have a minimum deposit of which percent of the trade value?

a) 20%
b) 30%
c) 50%
d) 100%

2. If you buy stock on Friday, on which of the following days will it settle (assuming no holidays in between)?

a) Monday
b) Tuesday
c) Wednesday
d) Thursday

3. If you pay for stocks in full, the most you can lose is:

a) 50% of your investment
b) 100% of your investment
c) 150% of your investment
d) 200% of your investment

4. If you have a margin account and buy $2,000 worth of stock, what is the minimum you must deposit to the account?

a) $500
b) $1,000
c) $2,000
d) $3,000

5. You buy 200 shares of stock at $50 per share. What is your return on investment if the stock moves to $60 assuming you deposit the minimum amount?

a) 20%
b) 30%
c) 40%
d) 50%

6. You buy 400 shares of stock at $30 per share and deposit 50%. The stock rises to $35. What is the amount of cash you're allowed to withdraw?

a) $100
b) $500
c) $1,000
d) $2,000

7. If your equity drops below 50%, the account is called a:

a) Maintenance account
b) Cash account
c) Restricted account
d) Margin account

8. The equity percentage is found by:

a) Market value/Debit balance
b) Debit balance/Market Value
c) Market value/Equity
d) Equity/Market Value

9. What is the main risk in holding a covered call position?

a) You are assigned early
b) The stock pays a dividend
c) The stock rises
d) The stock falls

10. Your account has a market value of $30,000 and equity of $18,000. How much excess equity do you have?

a) $3,000
b) $4,000
c) $6,000
d) $12,000

11. Your account has a market value of $22,000 and a debit balance of $10,000. What is your cash available and buying power?

a) $500 cash available/$1,000 buying power
b) $1,000 cash available/$2,000 buying power
c) $500 cash available/$2,000 buying power
d) $1,000 cash available/$500 buying power

12. If your account falls below the house minimum percent equity, you'll receive:

a) Additional SMA
b) A Reg T call
c) A Fed call
d) A maintenance call

13. The stock is trading for $48 and the $50 put is trading for $3. What is the intrinsic value?

a) There is no intrinsic value
b) $1
c) $2
d) $3

14. Your account has a market value of $14,000 and a $10,000 debit. Assuming your broker has a 30% requirement, what is the amount of your maintenance call?

a) $500
b) $400
c) $300
d) $200

15. Which of the following is NOT a way to meet a maintenance call?

a) Buy securities on margin
b) Deposit cash
c) Deposit securities
d) Sell securities in the account

16. Your account has a market value of $28,000 and a $20,000 debit. What is your percent equity after depositing $400?

a) 20%
b) 30%
c) 40%
d) 50%

17. Long option holders have:

a) Unlimited risk
b) Assignment risk
c) Obligations
d) Rights

18. Your account has a market value of $28,000 and a $20,000 debit. What of the following most closely represents your percent equity after selling $5,000 worth of stock?

a) 40%
b) 50%
c) 20%
d) 35%

19. To enter a covered call, you buy the stock and:

a) Sell the put
b) Buy the put
c) Buy the call
d) Sell the call

20. A "market order" guarantees:

a) The execution and price
b) The price but not the execution
c) The execution but not the price
d) Neither the price nor execution

21. Your account has a market value of $28,000 and a $20,000 debit. What is your percent equity after depositing $5,000 worth of stock?

a) 39%
b) 30%
c) 48%
d) 37%

22. Your margin cash and buying power are determined by:

a) SMA
b) Volatility of the market
c) The number of securities in the account
d) Supply and demand for credit

23. A call option gives the holder (buyer) the:

a) Obligation to buy stock
b) Right to sell stock
c) Right to buy stock
d) Obligation to sell stock

24. Which are more expensive with all other factors the same?

a) Calls are always more expensive than puts
b) Puts are always more expensive than calls
c) Low strike calls are always more expensive than high strike calls
d) Low strike puts are always more expensive than high strike puts

25. What is the biggest drawback to a margin account?

a) There is additional paperwork to sign
b) You could lose more money than what you deposited in the account
c) You must borrow funds in order to have one
d) Your broker can loan stocks from your account and they may not be there if you decide to sell

26. All short sales of stock must be executed on:

a) A downtick
b) The bid price
c) Either an uptick or downtick
d) An uptick

27. An uptick means that:

a) The last trade is higher than the previous trade
b) The last trade is less than the previous trade
c) The Dow is rising
d) The volume is rising on the Dow

28. If you short $10,000 worth of stock, how much money is required for margin?

a) $5,000
b) $10,000
c) No margin money is required for short selling
d) $2,000

29. You are holding three Intel $30 puts. You have:

a) The obligation to sell 300 shares of Intel for $30 per share
b) The obligation to buy 300 shares of Intel for $30 per share
c) The right to buy 300 shares of Intel for $30 per share
d) The right to sell 300 shares of Intel for $30 per share

30. Your credit balance is $20,000 and the market value short is $15,000. What is your equity percent?

a) 25%
b) 30%
c) 33%
d) 75%

31. Your credit balance is $20,000 and the market value short is $15,000. If you buy back $5,000 worth of stock, what is your equity percent?

a) 30%
b) 40%
c) 50%
d) 60%

32. What are the two types of options?

a) Long and short
b) Rights and obligations
c) Stock and bond
d) Calls and puts

33. If you have a $30 call, the $30 figure is called the:

a) Obligation price
b) Strike or exercise price
c) Multiplier
d) Total contract value

34. A call option gives the holder (buyer) the:

a) Obligation to buy stock
b) Right to sell stock
c) Right to buy stock
d) Obligation to sell stock

35. The price you pay for an option is called the:

a) Contract price
b) Multiplier
c) Strike price
d) Premium

36. In most cases, each option contract controls:

a) 100 shares
b) 1,000 shares
c) 1 share
d) 150 shares

37. You find a Microsoft $30 call trading for $4.30. Two contracts will cost:

a) $860 plus commissions
b) $430 plus commissions
c) $4,300 plus commissions
d) $8,600 plus commissions

38. You exercised four $50 puts. How much money will you receive?

a) $20,000
b) $2,000
c) $200
d) You would pay money for the exercise

39. If you open a margin account, your initial minimum deposit is called the:

a) Reg U amount
b) Fed T amount
c) Reg T amount
d) Fed U amount

40. Which corporation guarantees the performance of all option contracts?

a) CBOE
b) Fed
c) OCC
d) SMA

41. The last trading day for all stock options is generally the:

a) Second Friday of the expiration month
b) Third Friday of the expiration month
c) Third Thursday of the expiration month
d) Last Friday of the expiration month

42. You are holding two Intel $20 calls. You have:

a) The obligation to sell 200 shares of Intel for $20 per share
b) The obligation to buy 200 shares of Intel for $20 per share
c) The right to buy 200 shares of Intel for $20 per share
d) The right to sell 200 shares of Intel for $20 per share

43. Which of the following is true assuming all else constant?

a) $30 call is more valuable than the $35 call
b) $40 put is more valuable than the $45 put
c) $50 call is more valuable than the $45 call
d) $100 put is more valuable than the $105 put

44. Which Intel option will cost more money?

a) March $20
b) April $20
c) July $20
d) July $15

45. If you own a call option and wish to buy shares of stock with it, you must:

a) Accept the assignment
b) Submit exercise instructions
c) Submit assignment instructions
d) Accept the exercise

46. Any option price can be broken down into which two components?

a) Time value, intrinsic value
b) Volatility value, intrinsic value
c) Premium, time value
d) Premium, volatility value

47. The stock is trading for $53 and the $50 call is trading for $3.50. How much time value remains on this option?

a) 50 cents
b) $3
c) $3.50
d) There is no time premium

48. The option premium minus the intrinsic value equals the:

a) In-the-money amount
b) Out-of-the-money amount
c) SMA
d) Time value

49. The stock is $50. The $55 call is:

a) At-the-money
b) In-the-money
c) Out-of-the-money
d) Cannot be determined without prices

50. The stock is $100. The $105 put is:

a) In-the-money
b) Out-of-the-money
c) At-the-money
d) Cannot be determined without prices

51. A "limit order" guarantees:

a) The execution and price
b) The price but not the execution
c) The execution but not the price
d) Neither the price nor execution

52. Which options have the most time value associated with their strikes?

a) In-the-money
b) Out-of-the-money
c) At-the-money
d) It depends on the volatility

53. An in-the-money call is one where:

a) Stock price is equal to the strike price
b) Stock price is greater than the strike price
c) Stock price is less than the strike price
d) Cannot be determined without prices

54. An out-of-the-money put is one where:

a) Stock price is equal to the strike price
b) Stock price is greater than the strike price
c) Stock price is less than the strike price
d) Cannot be determined without prices

55. You paid $2.50 for a $20 call option. At which stock price will the option break even at expiration?

a) $22.50
b) $17.50
c) $15
d) $25

56. You paid $6 for a $70 put. At which stock price will the option break even at expiration?

a) $76
b) $67
c) $74
d) $64

57. Which put is more valuable than the $60 put (all else being equal)?

a) $55
b) $65
c) $50
d) $45

58. You own 5 $30 calls. What is the total exercise value?

a) $3,000
b) $1,500
c) $15,000
d) $150

59. You bought 10 $30 calls for $2. The stock closes at $35 at expiration. How much profit did you make?

a) $2
b) $3
c) $4
d) $5

60. If you exercise a call option early, you will lose the:

a) Premium paid
b) Intrinsic value
c) Time value
d) Stock

61. About the only exception to the rule of not exercising a call option early is if you wish to:

a) Sell your stock early
b) Collect a dividend
c) Participate in a stock split
d) Get rid of your call option

62. You buy 300 shares of stock at $30 per share and deposit 50%. The stock rises to $40 per share. How many more shares could you buy without sending in additional money?

a) 50 shares
b) 75 shares
c) 100 shares
d) 200 shares

63. A "fast market" is defined as one where:

a) The price is rising quickly
b) Orders are flowing so fast that the last quote may not be accurate
c) The price is falling quickly
d) Trades are executed quickly due to high liquidity

64. You place an order to buy 300 shares at a limit of $20. Which of the following is NOT a good fill?

a) Bought 300 at $20.50
b) Bought 200 at $20
c) Bought 300 at $19.50
d) Bought 100 at $20

65. You place an order to sell 200 shares at a limit of $45. Which of the following is a good fill?

a) Sell 200 at $44.90
b) Sell 100 at $45.75
c) Sell 200 at $46
d) Both b and c

66. The asking price on a stock is $42. You place an order to buy 100 shares at a limit of $42. This is called a:

a) Market order
b) Marketable limit order
c) Restricted market order
d) AON order

67. The stock is currently trading for $62. Which of the following represents an "or better" order?

a) Sell 100 shares at $62.50
b) Buy 100 shares at 62
c) Buy 100 shares at $61
d) Buy 100 shares at $62.50

68. Short selling stocks allows traders the opportunity to:

a) Profit from a neutral market
b) Profit from a rising market
c) Profit from a falling market
d) Profit from either a rising or falling market

69. A trader who sells stocks short accepts a theoretical:

a) Guaranteed return
b) Limited loss
c) Unlimited gain
d) Unlimited loss

70. The less risky an asset, the:

a) Higher the return
b) Higher the price
c) Lower the price
d) Higher the probability of losing principal

71. A good-til-cancelled (GTC) order" is good:

a) For the trading day
b) For a maximum of six months
c) For a maximum of nine months
d) For a maximum of one year

72. You entered a sell stop order at $25. What does this mean?

a) If the stock hits $25 or lower, your order becomes a live market order
b) If the stock hits $25 or higher, your order becomes a live market order
c) If the stock hits $25 or lower, your order becomes a $25 limit order
d) If the stock hits $25 or higher, your order becomes a $25 limit order

73. Stocks that have a large number of shares traded daily are:

a) Risky
b) Liquid
c) Volatile
d) IPOs

74. A stock is currently trading for $37 and you place an order to buy 400 shares at market. Which of the following is NOT a good fill?

a) Bought 300 at $37, bought 100 $37.50
b) Bought 200 at $37, bought 100 at $37.75, bought 100 at $38
c) Bought 400 at $36
d) Bought 300 at $37

75. "Or better" orders are ones where you place the order to:

a) Buy below the current price or sell above the current price
b) Buy above the current price or sell below the current price
c) Sell if the stock hits a certain price
d) Buy if the stock hits a certain price

76. The "day" order and "GTC" are the two most common time limits. Which of the following are two other time limits that are less commonly used?

a) Week, month
b) Good until filled, immediate or kill
c) Immediately fill, all or none
d) Immediate or cancel, fill or kill

77. What's one of the biggest risks in using GTC orders?

a) Getting partial fills
b) Forgetting that you placed it
c) Getting multiple fills
d) The broker may change the time limit and cancel it

78. The time limit for a market order can:

a) Be either a day or GTC order
b) Only be a day order
c) Only be a GTC order
d) You do not need to specify a time for a market order

79. If you must get in or out of a position, which is probably the best type of order?

a) Stop order
b) GTC order
c) Market order
d) Limit order

80. A stock is trading for $37. You place an order to buy 100 shares at $38 or better. Which of the following is not a good fill on the order?

a) Buy 100 at $38
b) Buy 100 at $37
c) Buy 100 at $36.50
d) Buy 100 at $38.50

81. If you buy shares of Microsoft, you are purchasing them on the:

a) NYSE market
b) IPO market
c) Primary market
d) Secondary market

82. Beta is a measure of:

a) Shares outstanding
b) Liquidity
c) Risk
d) Volume

83. Which of the following acts like a blend between stocks and bonds?

a) REITs
b) Treasuries
c) Common stock
d) Preferred stock

84. Which of the following is probably the most speculative of all investments?

a) Stocks
b) REITs
c) Mutual funds
d) Hedge funds

85. If you buy a $30 call option, you:

a) Have the right to sell stock at $30
b) Have the obligation to buy stock at $30
c) Have the right to buy stock at $30
d) Have the obligation to sell stock at $30

86. Sellers of options have:

a) Privileges
b) Obligations
c) Rights
d) No risk

87. If you buy an option, you are:

a) Short
b) Long
c) Neutral
d) Bullish

88. The OCC is the:

a) Options Command Corp.
b) Options Control Center
c) Options Clearing Corp.
d) Options Clearing Center

89. You own 100 shares of Microsoft and have sold a $35 call against it (covered call). Your broker calls and informs you that you have been assigned. This means you have:

a) Sold 100 shares of Microsoft and received $35 per share
b) Purchased 100 shares of Microsoft for $35 per share
c) The option to buy or sell 100 shares of Microsoft
d) The right to buy an additional 100 shares of Microsoft for $35 per share

90. You see an option quoted at $7.30. How much will it cost to buy 3 contracts (not counting commissions)?

a) $21,900
b) $21.90
c) $730
d) $2,190

91. You are holding a $60 put and the stock is $55 with one day to expiration. This put is:

a) Automatically exercised
b) At-the-money
c) In-the-money
d) Out-of-the-money

92. For stocks priced between $25 and $200, the option strike prices will be in:

a) $1 increments
b) $5 increments
c) $2.50 increments
d) $10 increments

93. You find a Microsoft option with the symbol MSQIE. What does the "I" stand for?

a) $50 strike
b) $45 strike
c) September
d) October

94. You bought a $60 call for $3. At expiration, the stock is trading for $66. What is the return on your investment?

a) 25%
b) 50%
c) 100%
d) 200%

95. You have a $30 call trading for $4. The stock is $33. What are the intrinsic and time values?

a) $1 intrinsic, $3 time
b) $0 intrinsic, $4 time
c) $4 intrinsic, $0 time
d) $3 intrinsic, $1 time

96. You paid $7 for a $40 put. The stock is currently $35. If the stock closes at the same price at expiration, you will lose:

a) $1
b) $2
c) $5
d) $7

97. Premium minus intrinsic value equals:

a) Risk
b) Time value
c) Exercise value
d) Strike price

98. The stock is $42. What is the moneyness of the $40 calls and puts?

a) Call is in-the-money, put is out-of-the-money
b) Call is out-of-the-money, put is out-of-the-money
c) Call is in-the-money, put is in-the-money
d) Call is out-of-the-money, put is in-the-money

99. If the stock is $74 at expiration, the $70 call must be worth $4 due to:

a) The OCC
b) Arbitrage
c) Leverage
d) Time value

100. You purchased a $40 put for $2. At which stock price will this put break even at expiration?

a) $38
b) $42
c) $40
d) It depends on the time premium


Home | About | Courses | Member Services | Investment Tools | Login
Register | FAQ | Contact Us | Disclosures