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Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. You could lose more than your original investment. Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. You could lose more than your original investment.

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Question 1 of 5

Buying a call option gives you:

  • A The right, but not the obligation, to buy a market at a set price before a start date.
  • B The right, but not the obligation, to sell a market at a set price before a start date.

Explanation

The right, but not the obligation, to buy a market at a set price before a start date.

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Question 2 of 5

An options intrinsic value is:

  • A Driven by factors affecting the probability that the option will expire in the money
  • B The difference between the strike price and the underlying share price.

Explanation

The difference between the strike price and the underlying share price.

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Question 3 of 5

When would you employ a bullish options trading strategy?

  • A If you think the underlying market price will fall
  • B If you think the underlying market price will stay the same
  • C If you think the underlying market price will increase

Explanation

If you think the underlying market price will increase

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Question 4 of 5

An options extrinsic value:

  • A Accounts for the time remaining till expiration and the implied volatility of the assets
  • B Represents the real value of the option at expiration date based on the underlying asset's price relative to the strike price

Explanation

Accounts for the time remaining until expiration and the implied volatility of the assets

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Question 5 of 5

A 'short straddle' involves:

  • A Simultaneously buying a long call and a long put with the same expirations and strike prices.
  • B The simultaneous sale of a call and a put, in the expectation that the underlying market will not move far from the strike.

Explanation

The 'simultaneous sale of a call and a put, in the expectation that the underlying market will not move far from the strike

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