As you can see, options are very flexible. If you stick to strategies that only require buying options, then you are limiting your downside to the cost of the options, but not realizing all the benefits you can get from the different ways of trading them. Selling options does not have to be risky (for example look at the covered call), and there are a multitude of ways to profit with varying degrees of risk.
To profit from options you only need to have some view of the market, and as you can see you do not even have to know whether it is going up or down, but just have a sense of the volatility. Technical analysis gives you the tools to determine the most likely outcome, and from that you can decide what kind of strategy is appropriate.
At the end of each module there is a quiz. You can take a quiz at any point, but we suggest you view each module before taking the quiz. When you’re ready to start the quiz, click the take quiz ‘Start’ button below -:
The Masters Certificate in Technical Analysis - Module 15
Questions – Module 15
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Question 1
An option contract... -
A
Cannot be offered on indices
B
Is a right to a buy or sell something in the future
C
Requires the buyer to complete the trade
D
Is always cash settled
Question 2
If you sell an option... -
A
You have a choice of buying or selling the underlying
B
You have an obligation to complete the transaction if the buyer wants
C
You will be paid a premium on the expiration date
D
You must have a strike price higher than the market price
Question 3
You buy a call option. On expiration you can -
A
Buy the underlying at the strike price, if it’s less than the market price
B
Lose your money, if the strike price is more than the market price
C
Celebrate if you made a profit
D
All the above
Question 4
You should exercise an American option if -
A
It’s a call option and the market price is more than the strike price
B
It’s a put option and the market price is less than the strike price
C
It’s a call or a put option, and it’s in the money by at least $10
D
It’s in the money and expiring
Question 5
Buying a protective put will -
A
Protect you from a downslide in a stock price
B
Allow you to gain from an uptrend as much as holding the stock
C
Let you buy shares at the price you want to pay
D
Let you profit from a bearish market
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