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28 Cards in this Set
- Front
- Back
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Opening Purchase is closed with a ____________________
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Closing Sale
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Opening Sale is closed with a ___________________
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Closing Purchase
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Purchase of a long call or sale of a short put are _____________
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Bullish
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purchase of a long put or sale of a short call are ____________________
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bearish
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If the market stays flat, customer will ___________ on a long straddle
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LOSE
(LL) |
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if the market stays flat, customer will ___________ on a short straddle
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GAIN
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Long Straddle =
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Long Call/Long Put
Profit: up OR down, more than premiums paid - same strike, same expiration - BOTH bullish and bearish |
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Short Straddle =
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Short Put/Short Call
Profit: price stays the same - same strike, same expiration - very high risk |
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Straddles =
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same strike price, same expiration
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Combinations
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different strike, and/or expiration
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Spreads: Purchase & Sale of either put or call
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different strike prices
and/or different expirations |
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when it is a call spread, stack _______________ on top
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lower
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when it is a put spread, stack ______________ on top
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Higher
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Long Call Spread:
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deposit: debit
Max loss: debit max gain: strike prices - debit BE: Long strike + debit |
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most spreads are closed by ______________ out of the position
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Trading
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exercise generally does not occur due to ________________
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high commissions
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if you start with a debit, you close position with a ____________
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credit
(visa versa) |
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when is the expiration date for options?
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saturday following 3rd friday of each month, 11:59 EST
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CYCLES: spot, next month, assinged month, assigned month
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ex: CYCLE 2: Feb, MAY, AUG, NOV
May (spot), June (next month), Aug, Nov |
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actual max contract life =
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8 months
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technical max life =
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9 months
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when is the last day to trade options?
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Friday prior to expiration
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when is last day to exercise?
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Friday prior to expiration
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when is last time to exercise?
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5:30 pm EST on this day
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when CASH dividends are paid there are ___________ to the strike price?
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NO ADJUSTMENTS
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Contracts are adjusted for WHOLE SHARE _____________
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stock splits
(strike price reduced, number of contracts increased) 2:1 EX: 1 ABC Jan 60 Call 2 ABC Jan 30 Call |
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Fractional Share Splits:
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pays a "20%" stock dividend:
Before: 1 ABC Jan 60 After: 1 ABC Jan 60 if exercised, the number of shares becomes 120 rather than 100 and price is at $50 rather than $60 aggregate amount stays the same (6k value) |
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what are interest rate options used for?
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speculate on interest rate movements
used by gov securities dealers to hedge inventories of t-bills, t-notes, and t-bonds |
