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Stock Trading & Options Knowledge Test
Sharpen Your Investment and Options Skills
Use this Stock Trading & Options Knowledge Test to see how well you handle core trading basics and options strategies across 12 multiple-choice questions. You'll spot strengths and gaps before you risk real money, and practice with simple, real-world setups. If you want an easier start, try the basic options quiz, or review with the fundamentals quiz .
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. &