Options Trading Practice Exam
Options Trading Practice Exam
About Options Trading Exam
The Options Trading Practice Exam evaluates your ability to analyse, execute, and manage options positions in financial markets. This exam measures your understanding of option fundamentals, pricing models, strategy selection, risk metrics, volatility assessment, and trade execution. Passing demonstrates you can apply options techniques to achieve investment and hedging objectives.
Who should take the Exam?
This exam is ideal for:
- Traders and portfolio managers
- Risk‑management professionals
- Financial analysts and research associates
- Investment advisors and wealth managers
- Derivatives sales and trading staff
- Anyone seeking to master options markets
Skills Required
- Basic knowledge of equities and derivatives
- Comfort with algebra and financial calculators
- Familiarity with spreadsheet modelling
- Understanding of market orders and execution platforms
Knowledge Gained
- How to interpret call and put payoffs and Greeks
- Methods for pricing options using Black‑Scholes and binomial trees
- Strategies for income generation, speculation, and hedging
- Techniques for measuring and managing options risk
- Approaches to trading volatility and implied‑volatility surfaces
- Practice with multi‑leg structures and dynamic adjustments
Course Outline
The Options Trading Practice Exam covers the following topics –
Domain 1 – Introduction to Options
- Definitions of calls, puts, and contract specifications
- Payoff diagrams and profit/loss profiles
- Option market conventions and terminology
Domain 2 – Options Pricing Models
- Black‑Scholes‑Merton framework
- Binomial and trinomial pricing trees
- Model inputs: volatility, interest rates, dividends
Domain 3 – Basic and Income Strategies
- Covered calls and protective puts
- Cash‑secured and naked strategies
- Roll‑forward and assignment management
Domain 4 – Risk Management and Margin
- Defining and calculating Greeks: delta, gamma, theta, vega, rho
- Position-level and portfolio‑level risk metrics
- Margin requirements and collateral
Domain 5 – Volatility Trading
- Historical vs. implied volatility
- Volatility skew and smile analysis
- Calendar, diagonal, and ratio spreads
Domain 6 – Advanced Multi‑Leg Strategies
- Vertical, horizontal, and diagonal spreads
- Straddles, strangles, butterflies, condors
- Synthetic positions and risk reversals
Domain 7 – Dynamic Adjustments and Hedging
- Delta‑neutral and gamma‑scalping techniques
- Vega and theta management
- Rebalancing triggers and execution tactics
Domain 8 – Practical Execution and Ethics
- Order types and execution venues
- Trade cost analysis and slippage
- Regulatory considerations and best practices
