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

1. What is the significance of the 'Delta' in options trading?

It measures the rate of change of the option's price with respect to changes in the underlying asset's price

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

2. 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

3. 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

4. How does the process of 'settling' futures contracts differ from options contracts?

Futures contracts settle through physical delivery, while options contracts settle in cash

Options contracts settle through physical delivery, while futures contracts settle in cash

Both futures and options contracts always settle in cash

Settling is not a concept applicable to either futures or options contracts

5. 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

6. What is the primary function of 'Gamma Scalping' in options trading?

To profit from market inefficiencies

To hedge against unfavorable price movements

To maximize profits through leverage

To manage and exploit changes in options' Delta

7. What does the term 'Implied Volatility' refer to in options pricing?

The actual volatility observed in the market

The volatility of the underlying asset's historical prices

The volatility implied by the options market participants

The volatility of the options contract itself

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

Market volatility risk

Interest rate risk

Credit risk

Unlimited potential losses

9. In futures trading, what is the purpose of 'Marking to Market'?

To determine the fair market value of the futures contract

To set the initial margin requirements for traders

To calculate the expiration value of the futures contract

To assess the impact of interest rate changes on the contract

10. What distinguishes 'Call Options' from 'Put Options'?

Call Options provide the right to sell, while Put Options provide the right to buy

Call Options provide the right to buy, while Put Options provide the right to sell

Call Options are only available for stocks, while Put Options are for commodities

Call Options are riskier than Put Options

Economics - Options and Futures MCQ Test 5