1.0 Beginner: The Basics of Options   What is an option? A financial tool called a derivative A financial tool to trade future contracts A financial tool to trade foreign exchange  A financial tool called a LEAP   Answer: A   Notes: Options are...

1. A customer with a margin account believes the market is going to head lower and wants trade stock and options. Because of the bear market, put premiums have become very expensive and call premiums have declined. Stock XYZ is currently trading at $50, and the Aug...

1. A trader buys 5 AAPL Jan 40 Calls @ $8.00 and sells 10 AAPL Jan 50 Calls @ $2.00 when the market price of AAPL is at 43. The position created is: Ratio Spread Calendar Spread Vertical Spread Call Spread Answer: A The trader created a 2x1 ratio call spread on...

Rho is the rate at which the price of an option changes relative to a change in interest rates. In other words, rho measures the sensitivity of an option’s price or a portfolio to a change in interest rates. For example, if an option has a rho of 1.0, then for...