Options Trading Quiz: Test Your Stock and Options Know-How
Quick, 12-question options trading test. Instant results and explanations.
Editorial: Review CompletedUpdated Aug 25, 2025
Use this options trading quiz to check your grasp of stock and options basics, strategies, and risk management in 12 quick questions. If you want more practice, start with the basic options quiz, review market concepts in a financial markets quiz, or strengthen fundamentals with an investment basics test.
Learning Outcomes
- Analyse market indicators to make informed trading decisions.
- Identify key differences between calls and puts in options contracts.
- Evaluate risk-reward scenarios for various trading strategies.
- Apply technical analysis to interpret price charts and trends.
- Demonstrate understanding of option pricing factors and Greeks.
- Master position sizing and risk management principles.
Cheat Sheet
- Understand Market Indicators - Think of indicators like your market compass; tools such as moving averages, RSI, and MACD help you spot trends or potential reversal points before they happen. For example, when the 50-day moving average crosses above the 200-day, it's a classic bullish signal that can boost your confidence.
- Differentiate Between Calls and Puts - Calls give you the right to buy an asset, while puts give you the right to sell it at a set price before expiration. Remember "Call up" to buy and "Put down" to sell, which is the kind of catchy slogan your brain loves. &
- Evaluate Risk-Reward Scenarios - Use the risk-reward ratio to see if the prize is worth the gamble: Potential Loss ÷ Potential Gain. A ratio of 1:3 means risking $1 for a chance to make $3, which often keeps your edge sharp and your losses small.
- Apply Technical Analysis - Get cozy with price charts and patterns like head & shoulders, double tops, and flags - they're like secret messages from the market. Spotting a head and shoulders pattern, for instance, can hint at a pending trend reversal that savvy traders jump on.
- Master Option Pricing Factors - Option prices dance to the tune of the underlying asset price, strike price, time until expiration, volatility, interest rates, and dividends. The legendary Black-Scholes model is your backstage pass to estimating fair option values.
- Learn the Option Greeks - These are your option superpowers: Delta measures price change per $1 in the asset, Theta tracks time decay, and Vega shows how volatility shifts premiums. For example, a Delta of 0.5 means your option moves $0.50 when the underlying moves $1 - math that turns you into a prediction pro.
- Implement Position Sizing - Decide how much capital to risk on each trade so you're never betting the farm. A popular rule: risk no more than 2% of your total account on any single play, keeping your portfolio comfy through wild market swings.
- Practice Risk Management - Use stop-loss orders to put a protective fence around your profits and cut losses short. For instance, setting a stop-loss at 5% below your entry price can save you from nasty surprises.
- Understand Implied Volatility - IV reflects market expectations of future price swings and directly affects option premiums - higher IV means pricier options. Keeping an eye on IV gives you a sneak peek at market mood and potential cost.
- Stay Informed on Market News - Financial headlines and economic data releases are like the market's group chat: earnings reports, GDP numbers, and geopolitical events all move prices. Tune in to reliable sources so you're always trading with the latest scoop. &