Super Economics Options And Futures Test - 57+ MCQs: Economics - Options and Futures Quiz: Test Your Knowledge with 5 Challenging Questions and Answers

1. In the context of futures trading, what is the primary factor influencing the 'Convexity' of a bond?

Market volatility

Time decay

Interest rates

Underlying asset's price movement

2. What is the term for an options strategy involving the purchase of one call option and the sale of one put option with the same strike price and expiration date?

Straddle

Strangle

Butterfly Spread

Iron Condor

3. What role does 'Slippage' play in futures trading?

Facilitates the matching of buy and sell orders in the market

Represents the difference between the expected price and the executed price of a trade

Serves as a risk management tool for hedgers

Guarantees the performance of each contract by acting as the counterparty

4. What is the main purpose of 'Options' in financial markets?

To represent ownership of a company

To provide the right to buy or sell an asset at a specified price

To measure the volatility of a stock

To calculate the dividend yield of a security

5. What is the term for the right to buy an asset at a specified price before a certain date?

Call Option

Put Option

Futures Contract

Hedging

6. What is a key characteristic of 'Futures Contracts'?

They are only traded on cryptocurrency exchanges

They involve an obligation to buy or sell an asset at a future date

They are exclusively used for short-term investments

They are less liquid than options contracts

7. In futures contracts, what is the term for the date on which the contract expires?

Strike Date

Maturity Date

Expiration Date

Options Date

8. What is the term for the simultaneous purchase and sale of options contracts with different expiration dates?

Iron Condor

Calendar Spread

Straddle

Butterfly Spread

9. What is the primary role of 'Rho' in options pricing?

It measures the rate of change of the option's price with respect to changes in interest rates

It represents the probability of the option expiring in-the-money

It indicates the time decay of the option premium

It measures the sensitivity of the option to changes in market volatility

10. What is the term for the simultaneous purchase and sale of the same or equivalent securities to profit from price discrepancies?

Options Trading

Futures Trading

Arbitrage

Speculation

11. What is the primary motivation for using options strategies such as 'straddles' or 'strangles'?

To guarantee a fixed return on investment

To maximize profits through speculative trading

To minimize risks by offsetting potential losses

To take advantage of high market volatility

12. In futures trading, what does 'Open Interest' represent?

The total volume of contracts traded on a specific day

The number of contracts outstanding and not yet offset by opposing transactions

The daily change in the number of contracts traded

The total value of all futures contracts in the market

13. In options trading, what is the primary purpose of 'Bermudan Options'?

To profit from market inefficiencies

To hedge against unfavorable price movements

To provide the right to exercise the option at specified dates before expiration

To generate income while holding a long stock position

14. What is the key characteristic of a 'Double No-Touch' option?

It provides the right to buy the underlying asset at a specified price

It provides the right to sell the underlying asset at a specified price

It pays a fixed amount if the underlying asset price stays within a specified range until expiration

It pays a fixed amount if the underlying asset price breaches a specified barrier during the option period

15. What is the key characteristic of an 'Iron Condor' options strategy?

Simultaneous purchase of a call option and a put option with the same strike price

Combination of a covered call and a protective put

Simultaneous sale of a call spread and a put spread

Simultaneous sale of a call option and a put option with different strike prices

16. What is the primary goal of the 'Ratio Call Write' options strategy?

To profit from market inefficiencies

To hedge against unfavorable price movements

To maximize profits through leverage

To generate income while holding a long stock position

17. How does 'Delta' impact the value of a call option as the underlying asset's price changes?

Delta has no impact on the call option's value

Call option value increases with higher Delta

Call option value decreases with higher Delta

Delta impacts the time decay of the call option

18. What is the purpose of 'Hedging' in the context of options and futures?

To maximize profits through speculative trading

To minimize risks by offsetting potential losses

To guarantee a fixed return on investment

To diversify investments across various asset classes

19. What is the primary objective of the 'Butterfly Spread' options strategy?

To hedge against unfavorable price movements

To maximize profits through leverage

To achieve a fixed return on investment

To take advantage of high market volatility

20. What is the primary risk associated with 'Naked Options' trading?

Market volatility risk

Interest rate risk

Credit risk

Unlimited potential losses

Economics - Options and Futures MCQ Test 4