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26.03.2014 admin
In the Series 7 exam, questions about options tend to be one of the biggest challenges for test takers.
In this article we'll give you a detailed description of the world of options contracts as well as the strategies associated with them. See: Options BasicsOptions Questions By most estimates, there are about 50 questions on options on the Series 7 exam, approximately 35 of which are questions that deal with options strategies.
Most Options Contracts Are Not ExercisedThe majority of options investors are not interested in buying or selling stock. Time Value for Buyers and Sellers Because an option has a definite expiration date, the time value of the contract is often called a wasting asset. Four No-Fail Steps to FollowOne of the problems that Series 7 candidates report when working on options problems, is that they are not sure of how to approach the questions. Step 1 and 2: The first item on your agenda when you see any multiple options strategy on the exam, is to identify the strategy. Just as you get prices of stocks from a stock quote, you get prices of stock options from options chains in options trading. Find Out How My Students Make Over 35% Profit Per Trade, Consistently and Confidently, Trading Options In The US Market Even In An Economic Downturn!
There are actually several popular formats for options chains which presents various options information. This is a more detailed options chain which presents all the basic information that the Basic Options Chains do and also the options greeks.
This is a processed options chain that presents details of options involved in specific options strategies.

A call or put options matrix aims to present as many strike prices and expiration months all on one page and is useful for options traders who using both long term and short term options in a single options trading position.
For options traders employing standardized options strategies such as the long straddle or the covered call, using specific Options strategies chains would really cut down the work of calculating the outlay and other specifics of the specific options trading strategy.
As you can see above, Options Matrix presents only the bid and ask prices of each option listed without any other information and is therefore the least useful for retail investors so far. This is because options questions make up a large part of the exam and many candidates have never been exposed to options contracts and strategies. Our test-taking tips will put you in a position to ace this portion of the Series 7 exam and increase your chances of getting a passing score.
Write the matrix down your scratch paper before starting the exam and refer to it frequently to help keep you on track. If you look at buying a call and buying a put, an imaginary loop around those positions is a straddle - in fact, it is a long straddle. Options chains are tables that outline all the available options of a particular optionable stock and is presented in a few different ways.
This tutorial shall cover the different formats of options chains and the kind of information that are presented in them. This enables options traders employing delta neutral options trading strategies or arbitrage strategies to make precise calculations on the position and size of position to take. Due to screen limitation, Options pricers normally presents either call options or put options only. Such options chains present only the various combination of options for a specific options strategy across various strike prices or expiration dates.

As you can see, the options strategies chain presents the net cost of the strategy at various strike prices as well as other information. If an options investor buys to close the position, the investor will sell the contract, offsetting the open long position. If the contract is a call and the market is above the strike (exercise) price, the contract is in the money - it has an intrinsic value.
If an investor, for example, is buying a call and a put on the same stock with the same expiration and the same strike, the strategy is a straddle.
It automatically calculates the net effect of putting on the position as well as other useful information so that options traders can make a decision on which spread to take quickly without wasting time on the calculation. The seller has the obligation to perform when and if called upon by the buyer; the most the seller can gain is the premium received. Pay very close attention to the concepts of opening and closing options contract positions and don't be locked into the idea of exercising contracts. This situation is called a zero-sum game: for every person who gains on a contract, there is a counterparty that loses.
On the short, or sell side, things are exactly opposite in that you could profit from an increase in the asset underlying a put option if you have shorted a put.

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