The Option Challenge: 160 PRACTICE QUESTIONS AND ANSWERS WORKBOOK ON EQUITY OPTIONS, SPREAD STRATEGIES, GREEKS AND VOLATILITY (Option Quiz Series 5)

This book combines the content of the previous 4 books of this series (option basics, strategy, Greeks and volatility). Also added is a chapter on advanced options and a theory chapter for concepts overview.

The reader is challenged with over 160 questions ranging from basic to intermediate to advanced level concepts of option trading theory and practice. Answers to each question are also provided.

QUESTIONS ARE IN A QUIZ FORMAT
- Multiple choices
- True or false
- No open ended answer choices

CONTENT
- Questions on Option Basics (chapter 1), Strategies (ch 3), Greeks (ch 5), Volatility (ch 5) and Advanced Options (ch 9)
- Each Question chapter is followed by Answer chapter
- Numerical questions
- Concept questions
- Extra chapter on Terminology and Concepts overview

The takeaway is to test and practice various aspects of your understanding of options, solidify the concepts behind the questions you answer correctly, and review the answers to understand the concepts behind the questions that you answer incorrectly.
Focus is primarily on equity options. Topics stressed are option basics, strategies, Greeks, volatility and advanced options. These topics are divided into five individual chapters, each followed by an answers chapter.
The material is geared toward traders looking to improve their trading skills, candidates preparing for job interviews, finance or math students, and others.

Questions in chapter 1 cover basics of option trading:
- Intrinsic / Extrinsic value of options
- Terminology
- Ask / Bid prices
- Breakeven
- Maximum Profit / Loss
- Expiration Diagrams
- Put Call Parity
- In the money (ITM) and OTM (out of the money) options
- Open Interest and Volume
- Arbitrage,
- Liquidity
- Leverage
- Option Rolling
- Assignment
- Margin Requirement
- Time Value
- Miscellaneous

Chapter 3 topics include Option Spreads and Strategies:
- Call Spread
- Short Put
- Risk Reversal
- Butterfly
- Back Spread
- Calendar Spread
- Expiration Diagram
- Maximum Profit Loss

Questions in chapter 5 cover the following Greeks:
- Delta
- Gamma
- Theta
- Vega
- Rho

Chapter 7 on Volatility covers:
- Terminology
- Earnings effect
- Option price relation to volatility
- Skew / Smile
- IV vs. Historical Volatility
- Volatility vs Fear in the market
- Model
- VIX
- Volatility Distribution
- Hedging
- Mean Reversion
- Volatility vs. Time
- Term Structure

Chapter 9 (Advance Options) tests on advanced level concepts like:
- Volatility
- VIX
- Volatility Futures
- Volatility Skew and Smile
- First Order Greeks
- Second Order Greeks
- Strategy
- Miscellaneous

Example of easy question:
Q. A call option is purchased for $1.50. What is the maximum profit potential?
a. 0
b. $150
c. Unlimited
d. None of the above.
Answer: C. Unlimited

Example of an intermediate question
Q. True or False: Selling a naked put has the same risk profile as a covered call.
a. True
b. False
Answer: a. True

Example of advanced level question is:
13. The slope of the Vega vs Spot price is called:
a. Delta
b. Gamma
c. Vanna
d. Volga
Answer: c. Vanna

About the Author:

Sunny Nariani is an active retail options trader with several years of trading experience. He uses several option strategies but primary focus is selling volatility. He is based in Dallas, TX. He is the principal at Ivol Technologies, creator of www.OptionQuiz.com. He ran his own IT consulting firm for several years. In his early career, he has been an IT consultant at Verizon, and software engineer at a number of premier organizations including University of Notre Dame. He has an MBA from UT Dallas, MS CS from University of Kentucky, and B Tech in EE from IIT, Mumbai, India.