Options theory

Options Theory and Greeks

The options round that option market makers run at interview, sat as a paper. Thirty items in an hour: payoffs, parity, structures and binomial pricing first, then the greeks - which way each one moves, where it is biggest, and what it costs to be long it.

Format

• 2 sections · 30 items · about 60 minutes
• No negative marking - answer everything.
• No going back. Answer or skip, and the next item loads.
• Every sitting is generated fresh - a retake is a new paper.

Sections

• Mechanics - 16 items, 30 minutes, no negative marking. 16 items, 30 minutes. Payoffs and profit at expiry, breakevens, put-call parity in every direction, synthetics, moneyness, early exercise, dividends, the standard structures and their bounds, and binomial pricing.
• Greeks - 14 items, 30 minutes, no negative marking. 14 items, 30 minutes. Delta, gamma, theta, vega and rho - signs, where each peaks across strike and time, the gamma and theta trade-off, the 0.4 rule, what implied vol is and is not, skew, and pin risk.

No firm runs this as an online assessment. The firms hiring for this role screen by interview instead, so this sitting models the work rather than anyone's test. Outcry is not affiliated with any firm and every question is generated by Outcry.