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Series 7 OT > Options > Flashcards

Options Flashcards

1
Q

Breakeven point for a Call spread

A
  • Work out premium difference

- Add lower strike price

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2
Q

Breakeven point for a Put spread

A
  • Work out premium difference

- Subtract higher strike price

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3
Q

Covered call

A

When you own the stock and sell a call option - for protection

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4
Q

Brekeven for Call straddle

A
  • Work out premiums

- Add to strike

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5
Q

Breakeven for Put straddle

A
  • Work out premium

- Minus the strike

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6
Q

Intrinsic value

A

Difference between market price and strike price

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7
Q

Call buyers want stock to go

A

Up

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8
Q

Put buyers want stock to go

A

Down

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9
Q

Call sellers want stock to go

A

Down

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10
Q

Put sellers want stock to go

A

Up

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11
Q

Buying Calls =

A

Right to buy

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12
Q

Buying Puts =

A

Right to sell

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13
Q

Selling Calls =

A

Obligation to sell

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14
Q

Selling Puts =

A

Obligation to buy

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15
Q

An insurance policy against falls in price

A

Buying puts

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16
Q

When closing an option, the gain / loss is the difference between:

A

the premiums paid

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17
Q

A Call option

A

The option to Buy

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18
Q

A Put option

A

The option to Sell

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19
Q

Sells are obligations

A

Buys are rights

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20
Q

If you buy a call you want it to go up.

A

if you buy a put, you want it to go down

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21
Q

Debit (bear) spread is a net buy

A

Credit (bull) spread is a net sell

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22
Q

Beakeven for Calls

A

Total premiums + Strike lower price

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23
Q

Beakeven for Puts

A

Total premiums minus Strike price

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24
Q

Calender spread

A

Buy near expiratoin. Sell distant expiratoin

25
Long Straddle
Buying a call and buying a put with same strike price and expiratoin
26
Short Straddle
Selling a call and selling a put with the same strike and expiratoin
27
Long Puts are in the money when
The stock trades below the Strike price
28
Long Calls are in the money when
The stock trades above the Strike price
29
Spreads
Work out the difference between the ask prices
30
Bullish
Buy calls | Sell puts
31
Bearish
Sell calls Buy puts Call spreads
32
Straddles are good when
Market is stable or when you are unsure of direction
33
FX options
Traded any time but only exercised at expiration
34
Debit spread
Investors profit if it widens
35
Debit spread
Investors profit if it widens or both sides excersize
36
Credit spread
Investors profit if it narrows or both sides expire
37
To protect short positions
Use long calls
38
If there is no intrinsic value and the stock value is worthless ..
The writer (seller) profits.
39
Gain =
Difference between the purchase price and strike | - minus premium
40
Combos and straddles have TWO break even points
Add the premiums together to the call price. subtract from the put price
41
50% stock dividend = 50% more shares.
Divide total by new amount
42
Cost of establishing spreads is SIMPLE.
One premium less the other premium
43
Maximum loss on short calls.
Share price minus the premium collected, multimplied by number of shares
44
European style executions - last day of trading.
US - can be any
45
Put Debit Spreads are profitable when:
- Spreads widen | - Excersized
46
Put Credit Spreads are profitable when:
- Spreads narrow | - Expire
47
Using yield-based options
Buy 30 yr T bond calls
48
Intrinsic Value
Strike price minus Stock price
49
When calculating intrinsic value
Dont count the premium
50
Straddles:
Work out intrinsic value plus or mins the premiums
51
In the money (intrinsic value)
Market price plus or minus strike price
52
Measure break even on call spread
Adding the difference between premiums to the lower strike price
53
Measure break even on a put spread
Subtracting the difference between premiums from the higher strike price
54
If you write more calls than you can cover
You will be fucked
55
Max loss in credit spread
The difference between the strikes the total premiums.
56
Max gain in credit spread
The total of premiums
57
Max gain in debit spread
The difference between the strikes and total premiums
58
Max loss in debit spread
The total of premiums

Series 7 OT (15 decks)

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