Options Knowledge Quiz

Welcome to the Options Knowledge Quiz. You have 20 minutes to complete the quiz. You will receive an email with your result and the correct answers at completion.

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You are directionally neutral, but firmly believe that over the next three months, the S&P 500 will be less volatile and will remain in a tighter trading range than most other investors believe. To act on this view, you should:
Theta measures the amount by which an option's time value decays every day. All else equal, which option would have the largest theta?
A client who is bullish the S&P 500 index is debating between buying ATM calls and buying an ATM call spread (long ATM call, short OTM call) on a larger notional. The option premium is the same for the two strategies. Which of the following is true?
Equity options usually exhibit a 'skew' with Black-Scholes implied volatilities higher for low-strike options than for high-strike options. In the presence of a steep skew, is it possible for a 10% out-of-the-money put to trade for more than an otherwise-identical 5% out-of-the-money put?
Suppose you buy a three-month call option on 100 shares of Coca-Cola (KO) at a strike price of $55 (with spot equal to $53). One month later, spot is again $53, and interest rates are unchanged. Assume zero dividends or corporate actions. Which of the following is true?