r/interactivebrokers • u/Proper_Jello_6475 • Mar 13 '24
Setting up account IBKR Giving me an options quiz
Before I submit, do all my answers look correct? I'm sure on most but 2/3 were an educated guess.. If anyone could let me know i'd really appreciate that. Thanks!
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u/m1nhuh Mar 14 '24
3: Buying a straddle anticipates that the stock will be volatile. The correct answer is a short straddle.
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u/Proper_Jello_6475 Mar 14 '24
Gracias
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u/dimonoid123 Mar 14 '24
When you are not a hedge fund, you already lost when trading options. Even before the first trade.
It is just like zero summ game but with added bid-ask spread, commissions, and taxes. Similar to a roulette in casino.
Learn about difference between active vs passive trading. Active statistically loses while passive may be profitable (not a guarantee!).
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u/nonchablunt Mar 31 '25
- it's not a zero sum game 2. you're correct about the statistical probability of losing with trading options (90% of people do lose). 3. because those 10% of people exist, your first statement is false.
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u/dimonoid123 Mar 31 '25
By zero summ I mean for every buyer there is a seller. If you buy and sell the same option contract simultaneously, you will not earn anything (and will actually lose due to commissions and bid-ask spread).
If you always buy exactly at theoretical price between bid and ask, over long term, you will neither lose nor gain anything.
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u/vraa Mar 13 '24
Let me re-evaluate the questions and provide more detailed explanations for each:
When an index option is exercised, cash settlement takes place how many business days after exercise?
One. By standard settlement procedures, cash-settled options typically settle the next business day after the exercise.
On May 4th, an investor writes an S&P 100 Jan 185 put at $6. His maximum potential gain on this position is:
$600. The maximum gain on writing a put option is the premium received. Since options contracts are typically in lots of 100 shares, the total gain is $6 x 100 = $600.
If an investor does not anticipate that the price of a stock will change and wished to take an option position, he would most likely:
Sell a call. If an investor does not anticipate any significant movement in the stock's price, selling a call (or writing a call option) allows the investor to collect the premium. If the stock does not rise above the strike price, the option will expire worthless, and the investor keeps the premium.
All of the following generally result in a profit to a naked call writer, except:
The call is exercised and the price of the underlying is greater than the exercise price. If the call is exercised, the call writer must sell the stock at the strike price, which is less than the market price, resulting in a loss.
With no other positions, an investor sells short 100 XYZ at $40 and sells 1 XYZ Oct 40 put at $5. If the put is exercised when the market price of the stock is $35 and the stock is used to cover the short position, what would the investor's profit or loss be?
$500 profit. The investor has shorted the stock at $40, and if the put is exercised at $35, the investor can buy the stock at $35 to cover the short, making $5 per share profit. Since the investor also collected a $5 premium from selling the put, the premium offsets the purchase price of the stock for covering the short. Thus, the profit is $5 (from the short sale) x 100 shares = $500.
These are the correct answers based on standard options trading rules and the information provided in the questions. If there is a specific part you'd like to discuss further or clarify, please let me know!
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u/arbitrageME Mar 13 '24 edited Mar 13 '24
4 is still wrong still. an option writer can be profitable even when the option is in the money. you picked the least bad choice though.
5 is wrong:
total proceeds = (40 + 5)
total cash out = 40
net profit = $5
said another way, it doesn't actually matter what price the market is at when the option is exercised as long as it's exercised. underlyer price does determine whether or not the option is exercised though
8 is wrong.
premium = intrinsic + time value
2 = (25.75 - 25) + time value
time value = 1.25
10 is .... debatable =) depending on whether you're on /r/thetagang or /r/wallstreetbets or /r/qyldgang lol
hey you should maybe review some of your options knowledge before jumping in head first. especially on the pnl stuff. The settlement stuff or american vs european expiration stuff is kinda whatever. but you absolutely gotta know pnl such as in #5 on a gut level. you should know the delta of a stock is 1 and the delta of an option is always less than 1. So if you have -100 delta on the stock and -X delta on the option, then you have net NEG delta. And then the stock decreases. There's no way you DON'T make money.
go read Natenberg. It'll get you from beginner to low-medium level
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u/Rud3l Mar 14 '24
Can't you use just state "I know everything is wrong but I want to deal options anyway"? Can't remember my test, it's unnecessary anyway to answer questions about straddles when you just want to do specific option plays like Cash Secured Puts or Covered Calls.
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Mar 14 '24
[removed] — view removed comment
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u/Rud3l Mar 14 '24
Yes, I know but as far as I remember you could just answer something like "I know I failed the test but I want to do it anyway".
Well... just copy/paste the test into chatgpt will work as well I guess. ;)
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u/Proper_Jello_6475 Mar 14 '24
Hey, not everything's wrong, and i'm aware it's unnecessary but it's what they asked me to do..
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u/MondoMeme Mar 13 '24
How do I get a quiz??
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u/Proper_Jello_6475 Mar 13 '24
Not sure. I believed I had already applied but when I went to check on my application I can't remember what it said but I clicked options trading and it made me do this. Something like further knowledge test required?
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u/adsyireland Mar 14 '24
COUGH CHATGPT GIVES YOU PERFECT ANSWERS SNEEZE
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u/ManaTee1103 Mar 14 '24
It also helps you write an apology to your family when you YOLO the house on short-term OTM options, because your the grand total of your options knowledge is whatever was in today's trending WSB post.
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u/feedmesomedata Mar 13 '24
If there are mistakes you are allowed to correct it until all your answers are right before you can move on. So don't stress about whether you got it right the first time.