Intermediate Level: Review

Question 1:

A bear call spread will result in what type of cash flow to the trading account?

1. a debit
2. a credit
3. a debit or a credit, depending on the margin rate
4. a debit or a credit, depending on expected market volatility

Question 2:

A calendar spread is:

1. bullish
2. bearish
3. neutral
4. bullish, bearish, or neutral, depending on the strike price and option type

Question 3:

A long straddle will typically show a profit:

1. when the market moves significantly in either direction
2. only when the market moves significantly higher
3. when the market settles on the strike price on option expiration day
4. when market volatility decreases

Question 4:

When using a stop order and the stop price is triggered:

1. all existing positions are hedged
2. all existing positions are liquidated
3. a market order is executed
4. a market order may or may not be executed, depending on current market prices