Options Trading MCQ Questions Answers

1. Which of the following would not be an example of managing risk?

2. Which of the following is a way to quantify the risk of a given security?

3. How would an options investor diversify their portfolio?

4. Which of the following is a common strategy used after an options trader has had a few successful transactions?

5. What would an investor who is employing the straddle technique hope to happen?

6. What should an options investor do if a call option they own is out of the money and nearing expiration?

7. Which of the following would be a good example of risk mitigation?

8. What would be the objective of a conservative trader's portfolio?

9. Which of the following would technical analysis include?

10. What does heavy volume trading indicate?

11. What is the offset to limiting downside?

12. What does the Monte Carlo method of pricing options attempt to do?

13. What would an investor with a large risk tolerance level most likely do?

14. Why is it important to manage risk when trading stock options?

15. What is the "expiration date"?

16. What is meant by "long" in a stock or option?

17. Which of the following would help protect against downside risk?

18. Why would an investor not utilize an options trading strategy?

19. Which of the following situations has the least risk?

20. Why would someone sell call options on a security they own?

21. Which of the following is the most profitable?

22. What is candlesticking?

23. How does the "Iron Condor" technique limit the downside?

24. How is risk measured?

25. What is the primary goal of technical analysis?

26. Why would an options trader want to create various portfolios?

27. What is the purpose of candlestick charting?

28. What happens when a trader uses a straddle?

29. What is the relationship between fundamental and technical analyses?

30. What would an investor using the Black Scholes model be doing?

31. What is meant "short selling"?

32. Which of the following is an assumption made by a technical analyst?

33. What skills would technical analysis use primarily?

34. What is a "strangle"?

35. What is the legal requirement regarding portfolios?

36. What is a "put"?

37. What is an "option spread"?

38. What is meant by a "bull market"?

39. What factors does technical analysis primarily rely on?

40. How often should a trader revaluate the holdings in their portfolios?

41. Which of the following would not be an example of managing risk?

42. Which of the following would most likely be a way to classify various portfolios?

43. Which of the following is an example of options used to mitigate risk?

44. Which of the following would be a way to limit one's potential losses?

45. Why would an investor be unlikely to hold growth, value, small cap, and index portfolios all at once?

46. Why do investors often expect the beginning of the year stock prices to rise?

47. Which of the following is a criticism of both fundamental and technical analyses?

48. What is portfolio management?

49. What happens to an investment if risk is mitigated properly?

50. Which of the following is an advantage of having multiple portfolios instead of only one?

51. Why would an options trader invest only in options of companies which have a history of paying dividends?

52. What is a sideways chart?

53. What is meant by a "bear market"?

54. Why might an options trader have portfolios based on expiration?

55. Why would a trader liquidate a portfolio?

56. Which of the following is the least risky investment in options?

57. What does an options trader look for when charting?

58. What is "strike price"?

59. What is meant by a "butterfly" trading strategy?

60. Would a person who actively buys and sells options contracts be considered an investor?

61. What is a "call"?

62. When is the straddle trading strategy appropriate?

63. What would be the risk tolerance level of a retired government worker in general?

64. What is the primary method to mitigate risk?

65. What is meant by using the straddle stock trading strategy?

66. What is meant by a covered call?

67. How would an options trader use the Black Scholes pricing model as a trading strategy?

68. How often would an active options trader perform technical analysis?

69. Which type of analysis relies on charting?

70. What is a "margin account"?

71. What would an investor who is bullish most likely do?

72. What is the ideal number of portfolios for an experienced trader?

73. Why is it important for an investor to know their risk tolerance level before trading options and investing in general?

74. Why are younger people more apt to take on riskier investments?

75. What is a "straddle"?

76. Why would someone buy call options at the same strike price but stagger the expiration date?

77. How does selling options help someone with their portfolio?

78. What should a trader do if one portfolio is outperforming the others?

79. What is an options contract?

80. What is a covered call?

81. When would someone most likely place a stop loss order?

82. What is the purpose of using screening factors?

83. Which of the following is the optimal situation?

84. What is the most classic type of options trading?