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Advanced Level Review

Question 1:

Which of the following factors does NOT affect the price of an option:

  • a) strike price
  • b) expected market volatility
  • c) margin rate
  • d) time until expiration
  • CLICK FOR ANSWER

Question 2:

If all other market factors do not change, as time passes:

  • a) calls lose value and puts gain value
  • b) both calls and puts lose value
  • c) expected market volatility decreases
  • d) expected market volatility increases
  • CLICK FOR ANSWER

Question 3:

Gamma measures:

  • a) the amount the option price loses over time
  • b) the amount the option delta loses over time
  • c) the amount the option price changes as the market price changes
  • d) the amount the option delta changes as the market price changes
  • CLICK FOR ANSWER

Question 4:

Which statement is NOT true?

  • a) The Greeks (delta, gamma, theta, and vega) measure how option prices and risks change as market conditions change.
  • b) The Greeks are used by traders to control risk by creating hedge positions.
  • c) As expiration approaches, options become more risky and should always be hedged.
  • d) Hedging is similar to buying insurance.
  • CLICK FOR ANSWER
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