After becoming a proprietary trader at Maverick Trading and receiving my designation as an ETF Advisor (CETF®) through The ETF Institute, I created a trading website called Tradologist™.
During ownership, I created trader education quizzes and exams to educate people on the Stock Market. The website was designed to provide a certification and a portal for members.
Although the site never materialized like I planned and it was sold, I spent quite of bit of time and energy creating trading quizzes and an exam for the certification.
In this post, I am including the 100 questions from the exam. They will help you understand the overall market in regards to Stocks, Options, ETF’s and Futures.
On the site, there was a mission statement and a code of ethics. They are included below.
At Tradologist™, we hold members to high standards of ethics, respectability and professionalism. Members are expected to act responsibility and have integrity in the trading industry. Tradologist™ has executed a code of ethics for which you are expected to comply and abide by:
- I will act with integrity and have respect to all prospective or existing clients, colleagues, or other industry professionals
- I will not falsify, overstate or misrepresent my trading knowledge or trading performance as a Certified Tradologist™
- I will carry out the continual improvement of my professional knowledge in the trading industry
- I will adhere to regulations and laws in the investment industry as it is related to the trading industry
- I will not use the Certified Tradologist™ designation during lapsed, expired or non-renewed certification periods
Here are the market areas you will gain knowledge in:
- Trading Knowledge
- Day Trading
- Stock Trading
- Options Knowledge
- Futures Intelligence
- Trend Trading
- Rules & Regulations
- 1. In theory, the belief is that speculators contribute value to the market by: A. Often producing uncertain volatility B. Supplying liquidity in the marketplace C. Hedging positions D. There is no impact on market prices
- Feedback: B. Speculators supply liquidity in the marketplace. This allows hedgers to offset positions in an efficient manner. (General Trading Knowledge)
- 2. A customer buys a March E-mini S&P 500 (ES) Futures contract at 2300.50 per contract. The price quickly spikes to $2320.50 per contract. How does he offset his position in order to exit the trade and take profits: A. He/She buys a March E-mini S&P 500 (ES) futures contract B. He/She buys a March E-mini S&P 500 (ES) call option C. He/She sells a March E-mini S&P 500 (ES) call option D. He/She sells a March E-mini S&P 500 (ES) futures contract
- Feedback: D. In order to offset / exit a futures contract, a contract on the exact exchange, same delivery month and of the same futures instrument would have to be sold (if originally purchased) or needs to be bought (if you originally sold short). (Futures Markets Intelligence)
- 3. The use of margin to maximize the advantage of an investment is considered: A. Delta B. Positioning C. Leverage D. Volatility
- Feedback: C. The use of margin to maximize the advantage of an investment is considered leverage. (General Trading Knowledge)
- 4. In order to offset a short put option position, you would do the following: A. Sell a put and a call option B. Sell a call against the short put option C. Buy back the identical put option D. Sell the identical put option
- Feedback: C. In order to offset a short put option position, you would buy back the identical put option. (Options Market Knowledge)
- 5. A stock index futures contract such as the E-Mini S&P 500 (ES) can be settled: A. Cash B. Stock Shares C. Stock Certificates D. Both B & C
- Feedback: A. A stock index futures contract such as the E-Mini S&P 500 (ES) is cash settled and can only be settled in cash. (Stock Trading Foundation)
- 6. Your margin level dipped below the required maintenance margin level. Therefore, your account must go back to or exceed: A. Initial Margin Levels B. Portfolio Margin Levels C. Variation Margin Levels D. Maintenance Margin Levels
- Feedback: A. Your margin level dipped below the required maintenance margin level. Therefore, your account must go back to or exceed initial margin levels. (General Trading Knowledge)
- 7. An option spread can be of a debit or a credit spread structure: True or False
- Feedback: True: An option spread can be considered a debit spread or a credit spread: (Options Market Knowledge)
- 8. You lost your mobile device and your broker is unable to inform you of a margin call on your Crude Oil position. Your broker may: A. Use broken secure funds to make good on your account until you return B. Liquidate the Crude Oil position and forward you the debt for the loss in your account C. Contact your bank for direct wire transfer to your account D. Contact your agreement referrals for a wire transfer into your account
- Feedback: B. Your broker may liquidate the position and forward you the debt for the loss in your account. (Futures Markets Intelligence)
- 9.Your broker is required to use a written power of attorney to open a discretionary account: True or False
- Feedback: True. Your broker is required to use a written power of attorney to open a discretionary account. (Rules & Regulations)
- 10. A speculator profiting from daily moves in the market is a day trader: True or False
- Feedback: True. A day trader profits from buying and selling intra-day. (Day Trading Essentials)
- 11. When a speculator wishes to capitalize on the momentum of a trend, typically the trend trader will take a long position expecting prices to increase: True or False
- Feedback: False. A trader may capitalize on the momentum of a trend by going long or shorting the market. (Trend Trading Techniques)
- 12. What is considered a congestion area? A. Many buyers and sellers in one particular area preventing price movement B. An area where open interest is declining and buyers are entering C. Increased volatility with heavy buyers and sellers D. A level where a support area is broken and buyers are closing positions
- Feedback: A. A congestion area is where there are many buyers and sellers in one particular area preventing price movement. Multiple Choice Checkbox (General Trading Knowledge)
- 13. When a support area is held, buyers tend to come into the market: True or False
- Feedback: True. When a support area is held, buyers tend to come into the market. (General Trading Knowledge)
- 14. The S&P 500 Stock Index encompasses: A. 500 of the most volatile stocks in the United States B. 500 large-cap companies traded in the United States C. 505 large-cap companies traded in the United States D. 502 large-cap companies traded in the United States
- Feedback: C. Actually, as of 2015 the S&P 500 Stock Index encompasses 505 stocks due to two share classes of stock from 5 of its component companies. This was up from 502 stocks that was changed in 2014 and up from the initial 500 stocks that started in 1957. (Stock Trading Foundation)
- 15. A customer is holding a large call option position in TLT (Treasury Bond ETF) and fears the stock market will rally in the short term. In order to hedge against her TLT position, she should: A. Buy in-the-money call options in SPY (S&P 500 ETF) B. Buy out-of-the-money call options in SPY (S&P 500 ETF) C. Buy in-the-money put options in SPY (S&P 500 ETF) D. None of the above
- Feedback: A. To hedge against a decline in TLT, she would buy in-the-money call options in SPY. If TLT decreases, SPY will increase and offset losses. Thus providing a hedge. (Options Market Knowledge)
- 16. Buying a put or a call option is a wasting asset due to its shrinking value as expiration approaches: True or False
- Feedback: True. A put and call option purchase is a wasting asset due to its shrinking value as expiration approaches and the value sinks more rapidly as the expiration date nears. This is considered time value. (Options Market Knowledge)
- 17. Buying a deep out of the money call or put option can be like buying a lottery ticket because there is a very slim chance the option would become valuable prior to expiration: True or False
- Feedback: True. Buying deep out of the money calls and puts typically expire worthless and the option writer who took the other side of your position keeps all of the premium. (Options Market Knowledge)
- 18. If you sell a call or put option, you are considered the grantor or option writer: True or False
- Feedback: True. (Options Market Knowledge)
- 19. A long option straddle position requires: A. Buying a put and selling a call with the same strike price and expiration date B. Buying a put and selling a call with the same strike price and expiration date C. Buying a put and a call with the same strike price and expiration date D. All of the above
- Feedback: C. A long option straddle position requires buying a put and a call with the same strike price and expiration date. If you are expecting a big move in one direction or the other, this would be a viable strategy.(Options Market Knowledge)
- 20. An exponential moving average (EMA) is a: A. Simple moving averages give detail on past price data B. Moving average that contributed less weight to recent prices C. Moving average that contributes more overall weight to recent prices D. Both A & C
- Feedback: C. An EMA gives more weight to recent prices. (Trend Trading Techniques)
- 21. A market order is given when you are trying to get the best possible entry: True or False
- Feedback: False. Market orders are executed promptly at current market prices. (Rules & Regulations)
- 22. When a contract is settled, the settlement price is pegged at the top of the closing range: True or False
- Feedback: False. The settlement price is the average price at which a contract trades or the middle of the closing range. (Rules & Regulations)
- 23. A limit order is a direction to:
A. Offset an existing position in the market B. Buy or sell at a specified price or better C. Provides a guarantee to be filled at a specified price D. Only fill an order at a better price than specified- Feedback: B. A limit order is a direction to buy or sell at a specified price or better. (Rules & Regulations)
- 24. A customer places a limit order to sell eight contracts at the close. Four of the eight contracts are filled. The four contracts that were not filled were are broker error and should be reported: True or False
- Feedback: False. Unless stated differently, all orders are assumed as day orders. Therefore, if not filled by the close, then the remaining order is automatically cancelled. (Rules & Regulations)
- 25. An “immediate or cancel” order is the same as a “fill or kill order”: True or False
- Feedback: False. A partial fill can be given on an “immediate or cancel” order but not on a “fill or kill order”. (Rules & Regulations)
- 26. Picking stocks using fundamental analysis involves analyzing a company’s financial statements: A. True B. False
- Feedback: True. Analyzing company financials to determine current and the potential for future growth is fundamental analysis. (Stock Trading Foundation)
- 27. Resistance is a level used by traders for exiting a position: True or False
- Feedback: True. It is a common strategy for traders to sell at resistance. (General Trading Knowledge)
- 28. How is leverage and risk similar when it comes to potential of profit margin: A. There is a negative correlation B. There is no correlation C. There is a direct correlation D. All of the above
- Feedback: C. There is a direct correlation between leverage and risk. (General Trading Knowledge)
- 29. What is considered a Bullish outlook? A. A positive view on the market B. A negative view on the market C. A positive short term view and a negative long term view. D. None of the above
- Feedback: A. A bullish outlook means you expect prices to rise. (General Trading Knowledge)
- 30. You purchased an at the money call option the day Google is reporting earnings, the premium on the option must be paid: A. By the closing of the next business day because Google reported after the closing bell B. The day you purchased the call option C. Within 24 hours of the time stamp D. Within 1 hour of the purchase
- Feedback: B. The day you purchased the call option. (Options Market Knowledge)
- 31. Delta is the comparison of how much the option price moves compared to how much the underlying asset price moves: True or False
- Feedback: True. Delta is the comparison of how much the option price moves compared to how much the underlying asset price moves. (Options Market Knowledge)
- 32. The Greeks in option trading are considered: A. Delta, Gamma, Theta and Vega B. Delta is only considered The Greeks C. Delta, Gamma, Theta and Vol D. Delta, Gamma, Theta, Vega and Rho
- Feedback: D. Delta, Gamma, Theta, Vega and Rho (Options Market Knowledge)
- 33. You anticipate a sharp down move in a pharmaceutical company. You should consider: A. Sell call options B. Buy at the money puts C. Buy in the money puts D. All of the above
- Feedback: D. All would be consider bearish positions. (Options Market Knowledge)
- 34. A vertical spread is also considered a: A. Horizontal spread B. Strangle C. Bull call spread D. Debit spread
- Feedback: C. A bull call spread is also know as a vertical spread. They use two call options of the same expiration month but different strike prices. (Options Market Knowledge)
- 35. If you have a bearish view on the market, you would likely: A. Buy out of the money call options B. Sell out of the money put options C. Buy at the money put options D. None of the above
- Feedback: C. Buy at the money put options is the only answer since you are bearish, and you expect prices to go down. (Options Market Knowledge)
- 36. A bona fide hedger by the CFTC would be considered: A. A speculator seeking profit in the commodity markets B. A cattle feeder who buys corn to feed his cattle C. A wheat farmer selling his wheat using a forward contract D. None of the above
- Feedback: B. A cattle feeder buying corn to feed his cattle and would like the lowest price possible would be a bona fide hedger. (Futures Markets Intelligence)
- 37. You are bullish on the market so you buy one call option in the E-Mini S&P 500 futures. But after you place the order, you notice either the order number was defaulted to 10 or you changed the number to 10 by mistake. You now have 10 contracts. What should you do? A. Close the position immediately B. Wait and hope to see if the position goes in your favor C. Hedge the position and buy 10 puts D. Call your broker and tell them of the error
- Feedback:A. Close the position immediately. Once you close the position, you will be able to act more prudently. (Futures Markets Intelligence)
- 38. You are watching a financial network and you hear a recommendation by an analyst you admire. You should: A. Follow the advice only if a second opinion agrees B. Follow the advice since the analyst appears credible C. Complete your own due diligence D. Do the opposite of the recommendation
- Feedback: C. Completing your own due diligence is the obvious choice. (General Trading Knowledge)
- 39. United States Security & Exchange Commission has a mission is to protect stock brokers: True or False
- Feedback: False. This is a false statement. They look after investors, maintain fairness and order. (Rules & Regulations)
- 40. A call option is purchased when a speculator anticipates a market to move down and is bearish: True or False Options
- Feedback: False. If a speculator anticipates a market to go down and is bearish, she would buy a put option. (Market Knowledge)
- 41. Generally speaking, a scalper is considered a: A. day trader B. An options trader C. A spread options trader D. A swing trader
- Feedback: A. Generally speaking, a scalper is considered a day trader. (Day Trading Essentials)
- 42. If you buy an E-Mini S&P 500 futures contract, you are the: A. Hedger B. Short C. Long D. None of the above
- Feedback: C. If you buy an E-Mini S&P 500 futures contract, you are considered the long. When prices increase, you gain profit. (Futures Markets Intelligence)
- 43. European style options can only be exercised when the option expires: True or False
- Feedback: True: European style options must be exercised when the option expires. (Options Market Knowledge)
- 44. A vertical is a type of: A. Strangle B. Straddle C. Bull call spread D. Short position
- Feedback: C. A vertical can also be considered a type of bull call spread (debit to your account) or bear call spread (credit to your account). (Options Market Knowledge)
- 45. American style options can be exercised at any time prior to the option expiring: True or False
- Feedback: True: American style options can be exercised at any time prior to the option expiring. (Options Market Knowledge)
- 46. If you sell an E-Mini S&P 500 futures contract, you are the: A. Hedger B. Short C. Long D. None of the above
- Feedback: B. If you sell an E-Mini S&P 500 futures contract, you are considered the short. When prices decrease, you gain profit. (Futures Markets Intelligence)
- 47. After an option is purchased, it may or may not have intrinsic value: True or False
- Feedback: True. If an option is out of the money, there is no intrinsic value. Conversely, if the option is in the money, the option has intrinsic value. (Options Market Knowledge)
- 48. A hedger would primarily use the futures markets to: A. Scalp the futures for quick profit. B. Reduce exposure in the market. C. Offset risk of price movements. D. All of the above.
- Feedback: C. A hedger would primarily use the futures markets to offset risk of price movements. (Futures Markets Intelligence)
- 49. The sum of contracts either bought or sold in the futures market over a period of time is known as: A. Open Interest B. Open Supply C. Volume D. Volume & Open Interest
- Feedback: C. The sum of contracts either bought OR sold in the futures market over a period of time is known as volume. (Futures Markets Intelligence)
- 50. Buying options have less risk than selling options naked because they are: A. Tend to be more reasonably priced B. Always have value at expiration C. Limited to the premium paid D. None of the above
- Feedback: C. Buying options have less risk than selling options naked because they are limited to the premium paid. (Options Market Knowledge)
- 51. An order to buy or sell stock at a stated price or better is a: A. Stop limit order B. Limit order C. Market order D. Buy limit order
- Feedback: B. An order to buy or sell stock at a stated price or better is known as a limit order. (Stock Trading Foundation)
- 52. An order to buy or sell stock once the stock reaches a stated price is a: A. Limit order B. Stop limit order C. Stop loss order D. Market order
- Feedback: C. An order to buy or sell stock once the stock reaches a stated price is a stop loss order. (Stock Trading Foundation)
- 53. A stop order becomes a market order once the stock reaches a specified price: True or False
- Feedback: True. A stop order becomes a market order once the stock reaches a specified price. (Stock Trading Foundation)
- 54. Your customer buys a Treasury Bond call option at 1-24 and after an increase, sells the option at 1-46 (there are 1/64th ticks in bond options at $15.625 per tick). The profit gained was $443.75: True or False
- Feedback: False. The gain was $343.75. Calculation: 1-46 – 1-24 = 22/64ths. 22 x $15.625 = $343.75 (Options Market Knowledge)
- 55. You are anticipating the market to sell off and decide to buy a Treasury Bond futures contract at 1-45. Your stop loss is triggered at 1-29 (there are 1/32 ticks in bond futures at $31.25 per tick) and commission is $30.00 per contract. The gross loss was: A. $5300.00 B. $500.00 C. $530.00 D. $531.25
- Feedback: C. The gross loss was $530.00. Calculation: 1-45 – 1-29 = 16/32. 16 x $31.25 = $500.00 + $30.00 = $530.00 (Futures Markets Intelligence)
- 56. It is a bull market and the moving averages you track are positive. The market has pulled back and continues to hold support at a major level. To take advantage of this trend, you would sell the market: True or False
- Feedback: False. If a major support level is holding, you would buy the market here. (Trend Trading Techniques)
- 57. You have advised your client to liquidate a Dec E-Mini S&P 500 futures position and buy a March S&P 500 futures position since the Dec E-Mini S&P 500 futures contract is expiring. This is know as Transfer: True or False
- Feedback: False. This is known as rolling over. (Futures Markets Intelligence)
- 58. You forecast an increase in inflation rates. How would an increase in inflation rates impact interest rates: A. Interest rates would increase B. No impact on interest rates C. Interest rates may decrease or increase D. None of the above
- Feedback: A. Inflation is a component of interest rates. When inflation increases, interest rates are also expected to increase. (General Trading Knowledge)
- 59. You customer sells one SPY ETF put option at a premium of $5.00 ($235.00 Strike Price). If she exercises her put option, the minimum purchase price shall be $235.00: True or False
- Feedback: True. A buyer of a put option has the right but not the obligation to sell the underlying asset at the strike price. As a result, if she exercises her put option, her sales price will be $235.00. (Options Market Knowledge)
- 60. You have done your due diligence and fundamental analysis suggests Apple stock will increase. You have a $10,000 account and you are willing to risk 5%. At the money call options in the expiration month of choice are at $500.00 per option. You will: A. Buy 1 at the money put option B. Buy 1 in the money call option C. Buy 10 at the money call options D. Buy 1 at the money call option
- Feedback: D. Buy 1 at the money call option. $10,000 X 5% = $500.00. Therefore, buying 1 call option at the money is correct. (Options Market Knowledge)
- 61. All are true in regards to stocks/equities and futures being similar except: A. They both expiration dates B. They both limits on price and position C. They both have a short for every long D. They both have contracts and ownership
- Feedback: D. All are true except both having contracts and ownership. Stocks give ownership and Futures offer contracts. (General Trading Knowledge)
- 62. U.S. Stocks are regulated by the: A. FINRA B. CFTC C. SEC D. FDIC
- Feedback: C. Founded in 1934, the U.S. stock market is regulated by the Securities and Exchange Commission (SEC). (Stock Trading Foundation)
- 63. The U.S. Futures and Options market is regulated by the: A. CFTC B. FINRA C. NFA D. SEC
- Feedback: A. Founded in 1975, the Futures and Options market is regulated by the Commodity Futures Trading Commission (CFTC). (Futures Markets Intelligence)
- 64. An Exchange Traded Fund (ETF) is similar to Mutual Funds except: A. They bundle securities B. Are subject to volatility C. They trade throughout the day D. Diversified portfolios
- Feedback: C. An ETF trade throughout the day. Mutual Funds only trade at the end of the day at the net asset value (NAV) price. (General Trading Knowledge)
- 65. A swing trader: A. Typically hold positions over thirty days B. Typically hold positions less than two days C. Typically holds positions two days to two weeks D. None of the above
- Feedback: C. A swing trader typically holds positions two days to two weeks. (General Trading Knowledge)
- 66. An Exchange Traded Fund (ETF) is an investment fund that holds assets and has a primary function of tracking indexes: True or False
- Feedback: True: An Exchange Traded Fund (ETF) is an investment fund that holds assets and track indexes. (General Trading Knowledge)
- 67. When a futures contract is bought or sold, the price is determined by: A. CFTC B. This is prearranged by brokers in the pit C. SEC D. The Exchange
- Feedback: D. A futures price is decided by bids and offers through the exchange. The CFTC or SEC is not a part of pricing decisions. Brokers are not allowed to make prearranged trades. (Futures Markets Intelligence)
- 68. A clearinghouse is a corporation associated with an exchange for confirming and settling transactions. Since is makes itself the counter party on every trade, traders can liquidate positions promptly and efficiently without having to wait for the other party to liquidate.True or False
- Feedback: True. (Rules & Regulations)
- 69. The futures exchange has a principle function of: A. Allowing hedgers to transfer price risk B. Offering a market for selling commodities C. Offering speculators opportunity for profit D. All of the above
- Feedback:A. The futures market was founded for the purpose of hedging. (Futures Markets Intelligence)
- 70. As an option approaches expiration, the premium decays at an accelerated rate: True or False
- Feedback: True. The closer the option reaches expiration, the more the premium declines. (Options Market Knowledge)
- 71. The margin requirements in the futures market are the same for long and short positions: True or False
- Feedback: True. There is no bias for long and short positions. (Rules & Regulations)
- 72. A hedger may be required to pay less initial margin than that of a speculator due to the hedger: A. Pays interest to the exchange B. Adding risk C. Reducing risk D. Having no initial risk due to the hedge
- Feedback: C. A hedger may be required to pay less initial margin than that of a speculator due to the hedger reducing risk. (Rules & Regulations)
- 73. After hearing a tip regarding a potential company buyout on the CNBC Network, you should purchase call options to take advantage of the opportunity: True or False
- Feedback: False. You need to complete your own due diligence prior to acting on any tips. A financial network is not considered as a valuable resource for speculators to generate trade ideas nor complete their due diligence. (Options Market Knowledge)
- 74. You liquidate a transaction by the sale of an equal and opposite position from the one you originally initiated. This is known as: A. Offset B. Transfer C. Forward D. All of the above
- Feedback: A. If you liquidate a transaction by the sale of an equal and opposite position from the one you originally initiated you are offsetting your position and closing it out. (General Trading Knowledge)
- 75. A broker is found to be trading a discretionary account excessively for the purpose of gaining commissions. He is known to have been: A. Scalping B. Front running C. Churning D. Self dealing
- Feedback: C. A broker is found to be trading a discretionary account excessively for the purpose of gaining commissions he has been churning. This is an SEC and CFTC violation. (Rules & Regulations)
- 76. The intrinsic value of an option is: A. The underlying asset value B. The options remaining time value C. The amount the option is in the money D. None of the above
- Feedback: C. The intrinsic value of an option is the amount the option is in the money. (Options Market Knowledge)
- 77. Being able to have a considerable position with only a small amount of capital is considered: A. Ratio B. Leverage C. Asset Allocation D.Margin
- Feedback: B. Being able to have a considerable position with only a small amount of capital is considered leverage. You will have a favorable ratio using leverage but the best answer is leverage. (General Trading Knowledge)
- 78. The premium on an option is influenced by: A. The strike price of an option B. The volatility and price of the underlying security C. The time until expiration D. All of the above
- Feedback: D. All of the above are influencing the premium of an option. (Options Market Knowledge)
- 79. When are brokers required to provide trade confirmations: A. When opening and closing a position B. When opening a position C. When a positions value is changed D. When offsetting a position
- Feedback: A. Brokers are required to provide trade confirmations when opened and closing a position. (Rules & Regulations)
- 80. A Penny Stock is a common stock with a value that is less than one dollar: True or False
- Feedback: False. Recent changes by the SEC considers all shares that are traded below $5.00 are classified as Penny Stocks. The $1.00 definition has been revised. (Stock Trading Foundation)
- 81. Penny Stocks are considered to be valued by the SEC as shares under $5.00 and therefore are highly speculative: True or False
- Feedback: True. Penny Stocks have significantly lower prices than value stocks and therefore they are regarded as being highly speculative. Changes by the SEC considers all shares traded below $5.00 as Penny Stocks. The $1.00 definition has been revised. (Stock Trading Foundation)
- 82. Momentum trading deals with stocks or other securities that move quickly as well as significantly. A momentum trader may: A. Buy the stock on earnings B. Sell the stock on earnings C. Buy the stock on a spike in volume D. All of the above
- Feedback: D. All of the above are options for momentum based trading. (Stock Trading Foundation)
- 83. A thin market is a market that: A. Is Typically less liquid and subject to more volatility B. Has relatively few buyers and sellers C. Is also considered a narrow market D. All of the above
- Feedback: D. All of the above is true. (General Trading Knowledge)
- 84. A Pump and Dump (P&D) involves: A. Artificially inflating the price of a stock B. Uses fake and erroneous statements C. Attempts to sell low-cost stock at higher prices D. All of the above.
- Feedback: D. All of the above are true. In addition, it should be known that this is an illegal act and once the stock has surged to a specific level, it is then dumped and sold for a profit. Well-known celebrities may even endorse the product and fall victim to the fraudulent act. (Stock Trading Foundation)
- 85. A new trader should consider trading spreads on options because they offer more profit and less risk: True or False
- Feedback: False. Neither statement is true. It’s possible to have less profit and more risk. (Options Market Knowledge)
- 86. All speculators have significantly less position size than hedgers. Therefore, speculators have little impact on the number of bids and offers:True or False
- Feedback: False. Speculators provides market liquidity and contribute to overall market efficiency. (General Trading Knowledge)
- 87. In trading, a speculator uses the stock markets to: A. Gain an edge on the market B. Hedge a position C. Attempt to gain trading profits D. Earn profits on futures
- Feedback: C. The primary reason a speculator uses the stock markets is to gain profit. (Stock Trading Foundation)
- 88. Trend traders may use the existing trend in multiple time frames on a chart for entry and exits decisions: True or False
- Feedback: True. Trend traders may use the existing trend in multiple time frames for entry and exits decisions. For example, a trader may confirm an uptrend on a 15 and 60 minute chart and make a decision when the 5 minute also aligns. (Trend Trading Techniques)
- 89. A trading plan commonly offers: A. A journal of your trading activity B. Defines stop loss and profit targets C. Has a set of rules to follow D. All of the above
- Feedback: D. A trading plan commonly offers all of the above. (General Trading Knowledge)
- 90. The ETFs used to track the S&P 500, Dow Jones Industrial, Nasdaq, and the Russell 2000 index are: A. SPX, GLD, DIA, TLT B. SPY, DIA, QQQ, IWM C. SPDR, DJIA, QQQ, IWM D. SPY, DJIA, QQQ, IWM
- Feedback:B. SPY is the S&P 500, DIA is the Dow Jones Industrial, QQQ is the Nasdaq and IWM is the Russell 2000. (General Trading Knowledge)
- 91. A one lot SPX call option is equivalent to buying: A. 5 SPY ETF options B. 1 SPY ETF options C. 10 SPY ETF options D. None of the above
- Feedback: C. A one lot SPX call option is equivalent to buying 10 SPY ETF options. (Options Market Knowledge)
- 92. Hedge Funds and Commodity Trading Advisors (CTA) that manage funds commonly have management fees and performance fees. It is common practice to charge: A. 5% management, 50% performance: 5/50 B. 1% management, 20% performance: 1/20 C. 2% management, 20% performance: 2/20 D. Both B & C
- Feedback: D. Common practice and industrial averages suggest 1-2% management fees and 15-25% performance or incentive fees for a Hedge Funds or CTA managing client funds. (Rules & Regulations)
- 93. You anticipate the stock market to increase and buy 4 E-Mini S&P 500 (ES) futures contracts at 2225.25 (1 point = $50.00). The contract changes considerably and you offset your position at 2270.50. After a total commission of $8.00, what is the net gain? A. $1,304.50 B. $11,304.50 C. $11,272.50 D. $1,272.50
- Feedback: C. Long position at 2225.25 and offset at 2270.50. The profit per contract is 45.25 points. The gain is 45.25 points per contract x $50/point = $2,262.50 – $8.00 Commission = $2,254.50 x 5 contracts = $11,272.50 (Stock Trading Foundation)
- 94. Buying a deep out of the money put or call option would be: A. A smart decision because it is cheap B. A high probability to expire worthless at expiration C. Likely to have intrinsic value at the time of expiration D. None of the above
- Feedback: B. Buying a deep out of the money put or call option has a high probability to expire worthless at expiration. (Options Market Knowledge)
- 95. Trading advisors are required to: A. Not mislead their clients in anyway B. To have the high standards of ethics C. To not fabricate or promise trading profits D. All of the above
- Feedback: D. All of the above are required by trading advisors. (Rules & Regulations)
- 96. An automated trading strategy: A. Is similar to discretionary trading but not traded in the pit B. Uses a systematic approach for entry and exits on a trade C. Typically takes automated trades on bearish trends D. Can only use the coding Python for developing the system
- Feedback: B. Uses a systematic approach for entry and exits on a trade. (General Trading Knowledge)
- 97. If you are speculating in Treasury Bond futures, you will not have a higher margin requirement than a hedger: True or False
- Feedback: False. Since a hedgers position may be less risky than a speculators position, an exchanges may set a higher margin requirement. (Futures Markets Intelligence)
- 98. Trend trading strategies are beneficial because they: A. Allow you to take advantage a moving average breakout to ride a trend B. Can be used for long or short term strategies C. Eliminates researching financials using fundamental analysis D. All of the above
- Feedback: D. All of the above are beneficial for trend trading. (Trend Trading Techniques)
- 99. The option writer also know as the seller or grantor has: A. Has limited opportunity for profit and an unlimited liability B. Has unlimited opportunity for profit and an unlimited liability C. Has limited opportunity for profit and a limited liability D. Has unlimited opportunity for profit and an limited liability
- Feedback: A. The option writer also know as the seller or grantor has has limited opportunity for profit and an unlimited liability (Options Market Knowledge)
- 100. Moving Averages are often used for establishing a trend: True or False
- Feedback: True. Moving Averages are used for establishing a trend. (Trend Trading Techniques)
Risk Disclaimer
RazorTrader™ is not responsible for any losses incurred as a result of using our quizzes, or exam questions. We do not guarantee the accuracy of our quiz or examination questions. Trading stocks, options or futures involves risk and is not suitable for every investor.
