Foreign Exchange Options and Strategies Quiz

Test your knowledge of foreign exchange options with this quiz. Learn about different strategies and concepts such as covered calls, implied volatility, and barrier options.

Practice Learn Test

Which of the following is NOT a foreign exchange option strategy?

Straddle

Strangle

Iron Condor

Butterfly

What is the primary advantage of using foreign exchange options?

Guaranteed profit

Limited risk

Unlimited potential loss

Complicated taxation

Which of the following is an example of a currency option?

Forward contract

Swap

Put option

Spot contract

What is a covered call in foreign exchange options trading?

Selling a call option on a currency pair you already own

Selling a call option without owning the underlying currency pair

Buying a call option on a currency pair you already own

Buying a call option without owning the underlying currency pair

What is the difference between a call option and a put option in foreign exchange?

A call option gives the holder the right to buy a currency, while a put option gives the holder the right to sell a currency.

A call option gives the holder the right to sell a currency, while a put option gives the holder the right to buy a currency.

A call option obligates the holder to buy a currency, while a put option obligates the holder to sell a currency.

A call option obligates the holder to sell a currency, while a put option obligates the holder to buy a currency.

Which factor does NOT influence the price of a foreign exchange option?

Volatility

Interest rates

Maturity date

Currency denomination

What does 'in the money' mean for a foreign exchange option?

The option has expired worthless

The option has no intrinsic value

The option is currently profitable if exercised

The option is currently unprofitable if exercised

In the context of foreign exchange options, what is 'implied volatility'?

The volatility of the underlying currency pair's spot rate

The volatility of the options market

The volatility implied by the price of the options contract

The historical volatility of the currency pair

What is a barrier option in foreign exchange?

An option that becomes active only if a certain price barrier is breached

An option that does not have a specified expiration date

An option that can only be exercised by the option writer

An option that requires a barrier to be set by the option holder

#10

What is the main difference between European-style options and American-style options?

European-style options can only be exercised on the expiration date, while American-style options can be exercised at any time before expiration.

American-style options can only be exercised on the expiration date, while European-style options can be exercised at any time before expiration.

European-style options can be exercised at any time before expiration, while American-style options can only be exercised on the expiration date.

There is no difference between European-style options and American-style options.

#11

What is delta in the context of foreign exchange options?

The rate of change of the option price with respect to changes in the underlying currency pair's spot rate

The risk-neutral probability of the option expiring in-the-money

The ratio of the option premium to the price of the underlying currency pair

The time decay of the option premium as the expiration date approaches

#12

What is a strangle strategy in foreign exchange options trading?

Buying both a call and a put option with different strike prices but the same expiration date

Selling both a call and a put option with different strike prices but the same expiration date

Buying a call option and selling a put option with the same strike price and expiration date

Selling a call option and buying a put option with the same strike price and expiration date