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- from_human,from_gpt
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- As a trader,"on what should your focus be? ,Becoming a better trader"
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- What is options trading?,The buying and selling of stock option contracts
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- Describe a call,"A call gives you the right, but not the obligation, to buy stocks at a set price"
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- Describe a put,"A put gives you the right, but not the obligation, to sell stocks at a set price, on or before a given date"
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- What are the 2 most important factors to consider when buying and selling options contracts?,strike pricetime left until expiration
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- What is the strike price?,The price at which stocks are valued for a particular contract
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- What is another term for the market price of a stock option?,premium or ask price
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- How does an increase in the value of a security affect the premium of its call options?,The premium for those options will increase
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- What happens to the premium of a put option when its underlying stock's value decreases?,The premium goes up
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- What can be concluded when a call option's premium decreases?,The value of the underlying stock has decreased
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- What can be concluded when the value of a put option's premium decreases?,The value of the underlying stocks has increased
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- What 2 factors does an option trader have control over when purchasing stock option contracts?,strike pricetime until expiration
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- Another name for the exercise price,strike price
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- What is the interval for strike prices less than $25?,$2.50
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- What is the interval for strike prices between $25 and $200?,$5
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- What is the interval for strike prices above $200?,$10
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- When is a call option ITM?,When the underlying stock price is greater than the strike price
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- When is a put option ITM?,When the strike price is above the current stock price
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- For a call option,"what price relationship exists when the strike price is above the current stock price?,The contract is OTM"
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- For a put option,"what price relationship exists when the strike price is above the current stock price?,The contract is ITM"
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- What are the 3 relationships that can exist between a contract's strike price and the stock price?,In-The-MoneyAt-The-MoneyOut-Of-The-Money
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- What is the price relationship when a strike price and a stock price are the same?,ATM
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- Which strike/stock price relationship has the highest costs?,ITM contracts
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- How does the more an option is OTM affect its premium?,"The more OTM, the lower the option price"
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- Between ITM,"ATM, and OTM options, which is the riskiest?,OTM options - stocks require a larger movement before they are ITM"
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- Which strike/stock price relationship has the slowest movement in option price?,OTM
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- Which strike/stock price relationship has the fastest movement in price?,ITM
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- What is the best strike/stock price relationship to trade with for beginners?,ATM
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- What is another name for the time value of an option?,Extrinsic value
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- What is the extrinsic value of an option?,The dollar value placed on the remaining life of the option
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- What is the intrinsic value of an option that is OTM?,0 The option is of no real value
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- What does intrinsic value refer to?,The real value of the option
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- Explain time decay in terms of options trading,The decrease in time value of an option due to the option approaching its expiration date
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- What does it mean that an option is a wasting asset?,"Options are subject to time decay, and risk becoming worthless"
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- What happens to an option's premium the further it is away from expiry?,The premium increases
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- What is option volatility?,The measure of risk or uncertainty of an option
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- How does having a high volatility affect an option's premium?,High volatility will inflate the premium for that option
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- How does a low volatility affect an option's ask price?,Low volatility results in a lower ask price
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- What two components make up volatility for stock options?,historical volatility implied volatility
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- For options,"what is historical volatility?,How volatile the underlying stock has been in the past"
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- For options,"what is implied volatility?,The market's view on how volatile the underlying stocks will be in the future"
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- What does 'chasing strength' refer to?,Purchasing an option with a price that's inflated due to high volatility Chasing what appears to be a strong option once its volatility has already increased
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- What is the main risk of purchasing a volatile option?,Losing money quickly through purchasing an option with an inflated price
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- What benefit is there to purchasing volatile options?,Volatile options have the most potential for quick gains (but also losses)
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- What are the five Greeks?,delta gammatheta vegarho
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- What is option delta?,How much an option's premium changes for each $1 change to the underlying stock
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- What is option gamma?,The amount delta will change for every $1 movement of the underlying stock
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- What is option theta?,The value that an option loses each day it approaches expiration (t for time)
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- What is option vega?,How much the option premium will change as the volatility of the underlying stock changes (v = volatility)
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- What is option rho?,How much the stock option price will change as the interest rate changes (r = rate)
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- What is a bear market?,A market where stocks are trending down in value
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- What is a bullish strategy?,A strategy where you think stocks will rise in price
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- What is the name given to downward trending markets?,Bear markets
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- What is the name given to upward trending markets?,Bull markets
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- What are neutral stocks?,Stocks that aren't trending up or down
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- What is another name for neutral stocks?,sideways trending stocks or channeling stocks
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- What is a Married Put?,"When an investor purchases a put option, and at the same time purchases the same number of underlying stocks"
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- Why would an investor utilise a Married Put strategy?,To hedge their investment against a decrease in the value of their stocks
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- In a Married Put,"what is the most that can be lost?,The cost of the put option"
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- What is the strategy behind a Married Put?,"When the underlying stocks decrease in value, the put can be exercised so that the investor sells their stocks at the original purchase price - the same as the put's strike price"
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- What is hedging?,An investment taken out to limit the risk of another investment
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- What is a Protective Put?,When an investor purchases a put option to protect profits of stocks they already own
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- In the Protective Put strategy,"what does 'rolling up your options' refer to?,Purchasing put options on a rolling basis to lock in the increase in value of your stocks"
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- How do Protective Puts and Married Puts differ?,"In a Married Put, stocks are purchased when the put is purchased In a Protective Put, a put is purchased to protect stocks already owned"
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- What does 'writing' refer to for stock options?,selling stock options
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- What is a covered call option?,When the option seller owns the underlying stock the option is derived from
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- What is a naked call option?,When an option seller writes an option for stocks they don't own
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- When writing call options,"which strategy comes with a higher risk?,naked call options have a higher risk"
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- Why is writing naked call options risky?,"You are writing contracts for stocks you do not own, and are obligated to purchase the underlying stocks should a buyer exercise your contract"
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- What is the technical term for analysing stock charts?,Technical analysis
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- What is technical analysis?,The analysis of stock charts
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- What is a stock chart?,A graphical representation of a stock's price over a period of time
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- On a stock chart,"what does volume refer to?,The number of shares traded in a period of time"
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- What is the name given to 'the number of stocks traded over a particular period'?,volume
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- On a stock chart,"what does 'change' refer to?,The difference in a stock's latest closing price and its current price"
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- What does a spike in volume indicate?,"There have been many trades on the stock for that period, and thus the movement of the stock should be taken seriously"
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- What is an OHLC bar chart?,"A bar chart showing Open, High, Low, and Close values for stock over a time period"
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- What does 'price action' refer to?,The movement of a stock's price
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- What does each bar in a weekly price chart represent?,One week's worth of price action for that stock
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- In a bar chart,"what does OHLC refer to?,The open, high, low, and close values for a particular time period"
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- How does a line chart differ from a bar or candlestick chart?,Line charts only show closing values
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- What is a drawback of using a line chart?,Line charts do not allow you to evaluate the price range for the period
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- In a bar chart,"what does the horizontal line on the right of the bar represent?,The closing price of the stock for that particular period of time"
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- "<span style=""line-height: 13.1999998092651px;"">In a bar chart","what does the horizontal line on the left of the bar represent?</span>,The opening price for the stock for a particular period of time"
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- What does 'the body' refer to for candlestick charts?,"The rectangular part of the graph, representing the price range between the opening and closing prices for the period of time"
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- In a candlestick chart,"what do 'the shadows' refer to?,The tips or tails of the chart"
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- What do the shadows of a candlestick chart represent?,The high and low prices for the period
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- What does a white or green body mean for a candlestick chart?,The stock closed higher than it opened
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- What does a black or red body mean for a candlestick chart?,The stock closed lower than its opening price
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- For a white or green candlestick chart,"what does the top of the body represent?,The closing price for the period"
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- "<span style=""line-height: 13.1999998092651px;"">For a red or black candlestick chart","what does the top of the body represent?</span>,The opening price for the period"
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- What does a large body for a candlestick chart represent?,A large difference between the opening and closing prices for that period
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- Which three time frames can a trendline be narrowed down into?,short termintermediate termlong term
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- What is important when it comes to using timeframes for trendlines?,"Using short, intermediate, and long term time frames to get a bigger picture of the stock"
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- What is a trendline?,"A straight line on a stock chart drawn along at least two highs, or two lows"
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- What do more points on a trendline indicate?,"The more points, the more significant the trendline"
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- What increases the significance of a trendline?,"The more prices that touch the line, the more significant it is"
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- What information can be gleaned from many prices touching a trendline?,The trendline is significant of a real trend
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- What are trendlines used for?,Showing the direction of a stock's price
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- What three types of trend are there?,downward / bearishupward / bullishside to side / channeling
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- When are trendlines drawn through price highs?,When prices are trending downwards
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- When are trendlines drawn through price lows?,When prices are trending upwards
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- What signifies a side to side trend,When prices are moving up and down between two parallel price barriers
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- What name is given to a trend where prices move up and down between two parallel price barriers?,side to side
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- What does a trendline represent when drawn through price highs?,the resistance level
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- For trendlines,"what is 'resistance level'?,a trendline passing through price highs, with price action below the trendline"
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- What does a trendline represent when drawn through price lows?,the support level
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- For trendlines,"what does 'support level' refer to?,A trendline drawn through price lows"
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- What is a trendline break?,When prices break or drift out of a trend and start a new trend
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- What is trendline bounce?,"When prices move toward a level, touch it, and then bounce back in the original direction"
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- What does it mean to 'go long' on a stock?,To buy a stock
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- What does support refer to?,The price level a stock has had difficulty falling below
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- What does resistance refer to?,The price high a stock has had difficulty breaking through
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- What 2 scenarios are possible when a stock price meets its resistance or support?,It will either: bounce off the level and continue in the opposite direction or break through the level and find a new support or resistance
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- Which 5 factors psychologically influence the significance of levels for investors?,TREVR times tested recency extremity of level (new high/low) volume near level round numbers
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- What does the acronym TREVR represent?,The 5 factors that influence the significance of a level to investors
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- The greater the number of times a level is tested,"the {{c1::stronger}} it becomes in holding the stock back,"
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- The greater the volume traded near a level,"the {{c1::more significant}} the level is to investors,"
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- How does the age of a level affect its significance for investors?,"The more recent the level, the more significant"
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- How does the extremity of a level influence its significance for investors?,"The more extreme, the more significant"
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- What is significant of levels found at round numbers?,They leave a lasting imprint on investors
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- What do 'support' and 'resistance' refer to?,The prices on a chart that appear to hold the price back (rather than the lines for the levels)
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- What happens to a resistance level once the stock price breaks through?,It becomes the support level for the stock
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- What happens to a support level once the stock price breaks through?,It becomes the resistance level for the stock
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- What are technical indicators used for?,establishing trendsdetermining entry and exit signals
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- What does a moving average show?,the price trend over a period of time
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- From which values are moving averages usually calculated?,closing prices
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- How is a 7-day MA calculated?,"By taking the closing price for the last 7 days, and finding their average"
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- What does MA refer to?,moving average
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- What is an indicator?,a calculation based on a security's price and/or volume
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- What is a lagging indicator?,An indicator which trails the actual price action of the underlying stock
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- Why is MA a lagging indicator?,MA's show changes later than the actual price action does
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- How does an MA with a shorter period appear?,It closely mimics the price action
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- What 3 types of MA are there?,simpleexponentialweighted
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- How is an SMA calculated?,Each price point in the calculation is given equal weight
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- How is an EMA calculated?,Recent prices are given exponentially more weight than older prices
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- How is a WMA calculated?,Recent prices are given more weight than older prices
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- What is SMA?,simple moving average
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- What is EMA?,exponential moving average
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- What is WMA?,weighted moving average
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- Of the 3 types of MA,"which is most sensitive to price movement?,WMA"
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- Of the 3 types of MA,"which is the least sensitive to changes in price?,SMA"
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- When is an MA not useful?,When prices are not trending
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- How is stock volume important with regards to price action?,stock volume either supports or denies the legitimacy of price movement
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- When is it easier to find buyers and sellers?,When a stock is moving on high volume
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- Which indicator tells us about emotional excitement in a stock?,volume
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- What is usually evident from an increase in volume at the beginning of a new trend?,"That there is support for the price movement, and the trend is likely to continue"
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- At which point during a trend does an increase in volume most significantly support the price movement?,at the start of the trend
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- What may it signify if there is a spike in volume during an established trend?,The trend may be about to change
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- What may a divergence in stock price and volume indicate?,"There is little support for the price movement, and the trend has little likelihood of continuing"
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- What is stock price and volume divergence?,"When a stock price increases or decreases, and volume decreases (does not support the movement)"
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- How can volume and stock price indicate trader uncertainty?,When the price movement and volume is diverging
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- What does 'overbought' refer to?,"A technical condition where there has been a lot of buying, the price is considered too high, and is susceptible to a decrease in price"
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- Which term describes the following: A technical condition where there has been a lot of buying,"the price is considered too high, and is susceptible to decline,overbought"
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- What does 'oversold' mean?,"A technical condition where there is a lot of selling, the price is considered too low, and a rally in price is anticipated"
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- Which term describes the following: A technical condition where there is a lot of selling,"the price is considered too low, and a rally in price is anticipated,oversold"
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- What are the two types of indicator?,lagging indicators leading indicators
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- Which indicators are used to confirm price movement?,lagging indicators
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- Which type of indicator is more heavily affected by recent price changes?,leading indicators
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- What are leading indicators used for?,Generating buying and selling signals
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- What is used to generate buying and selling signals?,leading indicators
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- How can an oversold stock affect price movement?,Prices are susceptible to increases
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- How can an overbought stock affect price movement?,Prices are susceptible to decreases
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- Of the two types of indicators,"which leads to more false signals?,leading indicators"
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- How are stochastic indicators represented?,indicators that oscillate
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- What three types of stochastics exist?,fast stochasticsslow stochastics full stochastics
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- Which are the most stable and reliable stochastics?,slow stochastics
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- Why are slow stochastics called a 'momentum indicator'?,"They indicate if a market is moving to new highs, new lows, or just meandering in the middle"
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- What does an oscillating indicator show when it is above its 80 line?,"An overbought stock (lots of buying, stock price is too high)"
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- When does an oscillating stock reveal an overbought stock?,When it is above its 80 line
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- "When does an oscillating indicator reveal an oversold<span style=""line-height: 1.1;""> stock?</span>",When it is below its 20 line
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- What are the names of the two lines in a slow stochastics indicator?,%K%D
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- What are %K and %D?,The two lines that form a slow stochastics indicator
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- For slow stochastics,"what is %D?,It is a moving average of %K"
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- When is a slow stochastics indicator not useful?,In choppy or sideways trending markets
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- When is a slow stochastics indicator useful?,When the market is clearly trending up or down
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- What are the lines at 80 and 20 on slow stochastic indicators called?,Trigger lines
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- What is the name given to the following: when a market condition you specify is met,A trigger
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- What is a trigger?,When a market condition you specify is met
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- For a slow stochastic indicator,"when is the main buy or sell signal formed?,When %K crosses %D"
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- For slow stochastics,"what does %K crossing %D indicate?,That a reversal in trend is possible"
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- For slow stochastics,"what two events form a bullish signal?,both %K and %D drop to oversold territory and %K crosses %D in an upward direction"
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- For slow stochastics,"what two events must occur for a bearish signal to form?,both %K and %D must be in overbought territory and %K crosses %D in a downward direction"
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- What does Williams %R measure?,overbought and oversold levels
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- What is momentum?,The acceleration of a security's price or volume
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- Which term describes the following: The acceleration of a security's price or volume ,momentum
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- Where are the trigger lines for a Williams %R?,at -20 and -80
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- Which values indicate oversold stocks for Williams %R?,below -80
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- Which values indicate an overbought stock for Williams %R?,values above -20
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- What does the number in parenthesis on a Williams %R indicate?,The period used to calculate the Williams %R
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- What should be done when a possible entry / exit signal is determined using a leading indicator?,The price movement should be confirmed using a lagging indicator
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- Once a security is in oversold / overbought territory,"what should a trader always do?,wait for confirmation that there is indeed a price reversal"
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- What does a Williams %R tell traders?,"Whether a closing price is trading near a high, a low, or in the middle within the selected trading range"
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- Name 3 types of oscillating indicators,slow stochasticsWilliams %RRelative Strength Index
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- What does RSI stand for?,Relative Strength Index
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- What types of indicator are common to the following: Slow StochasticsWilliams %RRelative Strength Index,leadingmomentumoscillating
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- What is the centre line for RSI often viewed as?,Both a resistance and support line for the indicator
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- Where are the trigger lines for RSI?,30 and 70
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- When the RSI falls below 30,"in what state is the security?,oversold"
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- When the RSI is above 70,"in what state is the security?,overbought"
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- What does it generally mean for a security when its RSI is below 50?,The stock's losses are greater than its gains i.e. more selling than buying
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- What does it generally mean for a security when its RSI is above 50?,Its gains are greater than its losses i.e. there is more buying than selling
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- In an RSI,"where would you expect to find its line when the security's gains are greater than its losses?,above 50"
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- In an RSI,"where would you expect to find its line when the security's losses are greater than its gains?,below 50"
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- What types of indicator is MACD?,laggingmomentumoscillating
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- What does MACD stand for?,Moving Average Convergence Divergence
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- What two lines make a MACD?,MACD line (difference of two price action EMAs) signal line (MA of MACD line)
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- How is the MACD signal line calculated?,It is an MA of the MACD line
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- How is a MACD calculated?,By a long EMA being subtracted from a short EMA
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- What is a MACD 12,"26,9?,MACD with EMA 12-day, EMA 26-day, and signal line with MA 9-day"
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- From which values is a MACD histogram calculated?,The difference between the MACD line and signal line
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- When does a MACD make a bullish crossover?,When the MACD turns up and crosses the signal line
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- What is it called when a MACD line turns up and crosses its signal line?,Bullish crossover
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- What is it called when a MACD line turns down and crosses its signal line?,Bearish crossover
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- When does a MACD show a bearish crossover?,When the MACD turns down and crosses its signal line
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- What does a positive MACD indicate for its EMAs?,The short EMA is above the long EMA
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- What does a negative MACD indicate for its EMAs?,The long EMA is above the short EMA
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- When evaluating a MACD,"when is a stock in upside momentum?,When the MACD is positive"
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- When evaluating a MACD,"when is a stock in downside momentum?,When MACD is negative"
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- For MACDs,"what do increasing positive values indicate?,An increase in upside momentum"
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- For MACDs,"what do decreasing negative values indicate?,Increase in downside momentum"
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- For MACDs,"what is a bullish centreline crossover?,When the MACD line crosses the centreline in an upward direction (MACD turns positive)"
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- For MACDs,"what is a bearish centreline crossover?,When the MACD line crosses the centerline in a downward direction (MACD turns negative)"
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- Which term describes a MACD line crossing the centreline into the positive?,bullish centreline crossover
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- Which term describes a MACD line crossing the centreline into the negative?,bearish centreline crossover
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- As a beginner,"on what interval should stock charts be analysed?,6 months"
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- As a beginner,"what periods should be used for MA analysis?,8 day 23 day"
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- For analysing a stock chart with 2 MAs,"what should the longer MA be used for?,determing if there is a trend"
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- For analysing a stock chart with 2 MAs,"what should the shorter MA be used for?,confirming entry / exit signals"
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- When an oversold signal is produced,"what should be done before entering the trade?,wait for the security's price to rise above your short MA"
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- When an overbought signal is produced,"what should be done before entering the trade?,wait for the security's price to fall below your short MA"
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- What is the Relative Strength Index?,A momentum oscillator that measures the speed and change of a security's price movement
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- What is a derivative?,Another name for a stock option
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- What is another name for stock options?,Derivatives (options are derived from stocks)
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- What is fundamental analysis?,A technique that attempts to determine a security's value by focusing on underlying factors that affect a company's actual business and its future prospects
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- Which term describes the following: A technique that attempts to determine a security's value by focusing on underlying factors that affect a company's actual business and its future prospects ,fundamental analysis
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- What is the recommended length for a watch list?,50 - 100 stocks
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- What are the 4 essentials of trend analysis?,TCOL determining if Trend is up / downCorrelation between price and volumeevaluate Overbought / Oversold signalsdetermine Levels (support / resistance)
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- What does TCOL represent?,The 4 essential aspects of trend analysis
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- What is a stock option chain?,A list of all stock option contracts for a security
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- What is the name for a list of all stock option contracts for a security,stock option chain
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- What is a margin account?,An account where you can trade with borrowed money
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- Which type of brokerage account lets you trade with borrowed money?,Margin account
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- What is a non-margin brokerage account?,An account where you trade with your own money i.e. not borrowed
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- What type of brokerage account requires you to trade with your own money?,A non-margin account
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- What are the 5 ways you get taxed?,SpendingInflationDeathEarnings Saving / Investing
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- What does the SIDES acronym refer to?,The 5 ways you get taxed i.e. tax blindSIDES you
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- On which Friday of each month do options expire?,the 3rd Friday
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- What is leverage?,leverage allows a small amount of money to participate in the movement of a large amount of money
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- Which term describes the following: allowing a small amount of money to participate in the movement of a large amount of money ,leverage
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- How long before an option expires should you sell or close out your option positions?,30 days
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- What is time value erosion?,A decrease in the value of an option due to the option approaching its expiration
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- What happens to time decay in the last 30 days of an option?,It accelerates
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- When does time decay begin accelerating for any particular option?,From 30 days before expiration
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- If you are planning to hold a contract for 2 months,"how many months away should the contract be from expiration when you buy it?,3 months 2 months + 1 month sell date"
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- Why would you purchase a contract expiring in 3 months if you want to hold it for 2 months?,So that you can sell it 30 days before it expires
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- What does it mean to go short on a stock?,To sell a stock
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- What does 'closing a contract out' mean?,Selling your contract
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- What is the maximum gain on a put option?,The value of the option when the underlying security reaches zero
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- What is the maximum gain on a call option?,"unlimited the option's value will increase with the underlying security, which has no upper limit"
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- What is the name for the strategy when trading side-to-side or channeling stocks?,Neutral trading strategy
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- What is a neutral trading strategy?,A strategy based on side-to-side or channeling stocks
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- What name is given to the total number of option contracts that are available on a day?,open interest
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- What is open interest?,the total number of option contracts that are available on a day
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- When deciding to enter a trade,"what value should open interest be at for the security?,at least 100"
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- How would you offset the exposure of writing a call option?,by purchasing a call option with exactly the same features
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- What is an offsetting transaction?,an activity which exactly cancels the risks and benefits of another
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- Which term describes the following: an activity which exactly cancels the risks and benefits of another ,offsetting transaction
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- What is a stock market index?,Stocks grouped together to measure a sector of the market
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- Which term describes the following: Stocks grouped together to measure a sector of the market ,Stock market index
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- What does FTSE stand for?,Financial Times Stock Exchange
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- What does FTSE index?,The 100 companies on the London Stock Exchange with the highest market capitalisation
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- What are 'shares outstanding'?,Company stock currently held by all of its shareholders
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- Which term describes: Company stock currently held by all of its shareholders ,shares outstanding
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- What is market capitalisation?,The value of a company based on its outstanding shares multiplied by the current market value
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- Which term describes the following: The value of a company based on its outstanding shares multiplied by the current market value ,market capitalisation
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- How is performance of an individual stock or mutual fund gauged?,By comparing it to a relevant stock market index
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- How should one want an individual stock / mutual fund to perform in comparison to the index it tracks?,It should be keeping up with or beating its annual percentage return
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- What is a broad-based index?,An index designed to reflect the movement of an entire market i.e. covers a large number of stocks
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- Which term describes the following: An index designed to reflect the movement of an entire market ,broad-based index
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- Which broad-based index is heavily weighted in technology and internet stocks?,Nasdaq Composite Index
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- Which broad-based index is commonly referred to as the 'technology index'?,Nasdaq
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- What is used as a benchmark for the performance of a security?,The yearly percent return of the index it tracks
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- On an option chain,"what does 'last' refer to?,The last price at which the option was traded (could be minutes / days / weeks etc)"
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- In an option chain,"what does 'change' refer to?,The change in the option's price since the previous day's close"
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- How do a mutual fund and ETF differ in terms of when they can be traded?,mutual funds can only be traded at the end of the day ETFs can be traded any time of the day
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- What is a stop order?,An order placed with a broker to sell a security when it reaches a certain point
289
- Which term describes the following: An order placed with a broker to sell a security when it reaches a certain point ,stop order
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- What is a stop order used for?,limiting loss protecting gains
291
- What is another name for a stop?,hard stop
292
- How does a hard stop differ from a stop loss?,hard stop locks in profit stop loss limits loss on a trade
293
- What is a trailing stop?,a stop order that automatically fluctuates with an increase in the option's value
294
- In which direction is a trailing stop applicable?,"upwards i.e. trailing stop will adjust upwards with an increase in the value of an option, but never downwards with a decrease"
295
- What is a good practice for stop orders when entering a trade?,setting a 50% stop loss to reduce losses
296
- When may it be a good idea to place a hard stop at an option's break-even point?,once the trade has made around 30% profit
297
- What is the bid price?,The price at which you can sell an option you have purchased
298
- In an option chain,"what is the ask price?,The price at which you will purchase the option"
299
- Describe the '2 close exit strategy' for owning call options,exit when the stock closes 2 consecutive days below your 8dma
300
- Describe the '2 close exit strategy' for owning put options,exit when the stock closes 2 consecutive days above your 8dma