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?
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:
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:
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:
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
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