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41 Cards in this Set

  • Front
  • Back

What are the two types of Options

Calls and Puts

What are the classes of options

All calls of one issuer or all puts of one issuer are considered a class of an option

With regard to options, what is a series

All options of one issuer with the same class, exercise price, and expiration month

What are the two styles of options

American- Style


European Style

Nearly all equity options are conducted in what style?

American Style

What are the 3 equivalent terms for a buyer of an option

Long


Holder


Owner

What are the 2 equivalent terms for the seller of an options

Short


Writer

What can be the underlying instrument in an options contract?

Anything with fluctuating value.

What are the three specifications of an options contract?

Underlying Instruments


Price


Expatriation

What is a Long call

The right to buy 100 shares of a specific stock at the strike price before the expiration, if he chooses to exercise that right

What is a Short call

The obligation to sell 100 shares of a specific stock at the strike price if the buyer exercises the contract

What is a Long Put

The right to sell 100 shares of a specific stock at the strike price before the expiration if he chooses to exercise the contract

What is a short Put

The obligation to buy 100 shares of a specific stock at the strike price before the expiration if he chooses to exercise the contract

The buyer of an option wins when?

The option to be exercised

The seller of an option wins when?

The option expires

What is the market attitude of a call buyer?

Bullish

What is the market attitude of a call writer?

Bearish

What is the market attitude of a put buyer?

Bearish

What is the market attitude of a put writer?

Bullish

What is the definition of "In the money" for a both long and short calls

A call is in the money when the market price is GREATER than the strike price.

What is the definition of "At the money" for a both long and short calls

A call is at the money when the market price equals the strike price

What is the definition of "Out of the money" for a both long and short calls

A call is out of the money when the market price is LOWER than the strike price

What is the definition of "Intrinsic Value" for a both long and short calls

Intrinsic Value is the in the money amount, a call has intrinsic value when the market value is above the strike price

For options that are at the money or out of the money, what is there intrinsic value?

$0

What is the definition of "Parity" for a both long and short calls

When the premium is equal to intrinsic value

For calls, how do you determine the break even point?

The strike price plus the premium

For calls how do you determine the Intrinsic Value

Strike price - Market Price

What is the definition of "In the Money" for both long and short Puts

A put is in the money when the market price is lower than the strike price

What is the definition of "at the money" for both long and short Puts

A put is at the money when the market price equals the strike price

What is the definition of "Out of the Money" for both long and short Puts

A put is out of the money when the market price is higher than the strike price

What is the definition of "intrinsic value" for both long and short Puts

Intrinsic value is the at the money amount. A put has intrinsic value when the market price is below the strike price

For long and short puts, how do you determine the intrinsic value

Market Price - Strike Price

For long and short puts, how do you determine the breakeven point

Premium - Strike Price

Maximum gain for a Call Buyer?

Unlimited, the stock price can rise infinitely

Maximum Loss for a Call Buyer

The premium

Maximum Gain for a Call Writer

The premium

Maximum Loss for a Call Writer

Unlimited

Maximum Gain for a Put buyer

Options strike price - premium paid

Maximum Loss for a Put Buyer

Premium Paid

Maximum gain for a Put Writer

Premium received

Maximum Loss for a Put Writer

Put's strike price - premium, aka the break even.