What is the 'underlying asset' in an option contract?

The stock, index, or ETF the option is based on.

What does the 'strike price' represent?

The price at which the option holder can buy or sell the underlying.

What is the 'premium'?

The price paid by the buyer (or received by the seller) for the option.

What does 'expiration date' mean?

The last date the option can be exercised or traded.

What does 'in the money' mean for a CALL option?

The stock price is above the strike price.

What does 'in the money' mean for a PUT option?

The stock price is below the strike price.

What is 'intrinsic value'?

The amount the option is in the money.

What is 'extrinsic value' (time value)?

The remaining value due to time and volatility.

Which of the following best defines 'volatility'?

How much the price of the underlying moves over time.

What is 'implied volatility' (IV)?

The expected future volatility embedded in option prices.

What does the Greek 'Delta' measure?

The option’s sensitivity to the underlying price change.

What does 'Theta' represent?

Time decay — how much value an option loses per day.

What does 'Vega' measure?

Sensitivity to volatility changes.

What is 'Gamma' in options trading?

The rate of change of Delta with respect to the underlying price.

What is a 'call option'?

A right to buy the underlying asset.

What is a 'put option'?

A right to sell the underlying asset.

What does 'open interest' indicate?

The number of outstanding option contracts not yet closed.

What is 'assignment' in options trading?

When an option seller is required to fulfill the contract obligation.

Using the right to buy or sell the underlying at the strike price.

What does 'liquidity' mean for options?

How easily contracts can be traded without large price changes.

Quiz

Options basics Quiz

EducOptions

Last updated: October 9, 2025

16 Min Read

Risk Warning: Trading options involves a high level of risk and may not be suitable for all investors. All information on EducOptions.com is for educational purposes only and does not constitute financial advice.

Options Basics Quiz

Ready to test your foundation in options trading with this options basics quiz?
This beginner-to-intermediate quiz covers the essential building blocks — from strike price and expiration to intrinsic value, volatility, and the Greeks.
Each question includes an explanation, helping you strengthen your core understanding about options basics before exploring advanced strategies.