CSLB C20 TRADE TOUGHER EXAMS SET
FULL SOLUTION QUESTIONS AND
CORRECT ANSWERS
●● How can a stock investor make money?
Answer: Through capital appreciation and potentially dividends.
●● What is an ETF?
Answer: An exchange-traded fund that holds a basket of assets and
trades like a stock.
●● Why are ETFs useful?
Answer: They provide diversification and can simplify long-term
investing.
●● What does SPY track?
Answer: The S&P 500 Index.
●● What is QQQ?
Answer: An ETF that tracks the Nasdaq-100 Index.
●● What is an option?
,Answer: A contract giving the buyer the right, but not the obligation, to
buy or sell an underlying asset at a specified strike price by expiration.
●● What is a call option?
Answer: An option giving the buyer the right to purchase the underlying
asset at the strike price.
●● What is a put option?
Answer: An option giving the buyer the right to sell the underlying asset
at the strike price.
●● How many shares does one standard U.S. equity option contract
generally represent?
Answer: 100 shares.
●● Why are options riskier than owning shares?
Answer: They are leveraged and have expiration dates, so an option can
lose 100% of its premium.
●● What are regular U.S. stock market hours?
Answer: 9:30 AM to 4:00 PM Eastern Time.
●● What is pre-market trading?
,Answer: Trading that occurs before the regular session, commonly
beginning around 4:00 AM ET.
●● What is after-hours trading?
Answer: Trading after the regular session, commonly continuing until
8:00 PM ET.
●● Why can extended-hours trading be riskier?
Answer: Lower liquidity and wider spreads can produce greater
volatility and slippage.
●● What is a market order?
Answer: An order designed to execute immediately at the best available
price.
●● What is the main risk of a market order?
Answer: The execution price is not guaranteed.
●● What is a limit order?
Answer: An order that executes only at a specified price or better.
●● What is the main advantage of a limit order?
Answer: Price control.
, ●● What is the main disadvantage of a limit order?
Answer: The order may never execute.
●● What is slippage?
Answer: The difference between the expected execution price and the
actual execution price.
●● What is the bid?
Answer: The highest price a buyer is currently willing to pay.
●● What is the ask?
Answer: The lowest price a seller is currently willing to accept.
●● What is the bid-ask spread?
Answer: The difference between the ask and bid prices.
●● What does a narrow bid-ask spread generally indicate?
Answer: Greater liquidity and lower transaction friction.
●● What is liquidity?
Answer: How easily an asset can be bought or sold without significantly
moving its price.
FULL SOLUTION QUESTIONS AND
CORRECT ANSWERS
●● How can a stock investor make money?
Answer: Through capital appreciation and potentially dividends.
●● What is an ETF?
Answer: An exchange-traded fund that holds a basket of assets and
trades like a stock.
●● Why are ETFs useful?
Answer: They provide diversification and can simplify long-term
investing.
●● What does SPY track?
Answer: The S&P 500 Index.
●● What is QQQ?
Answer: An ETF that tracks the Nasdaq-100 Index.
●● What is an option?
,Answer: A contract giving the buyer the right, but not the obligation, to
buy or sell an underlying asset at a specified strike price by expiration.
●● What is a call option?
Answer: An option giving the buyer the right to purchase the underlying
asset at the strike price.
●● What is a put option?
Answer: An option giving the buyer the right to sell the underlying asset
at the strike price.
●● How many shares does one standard U.S. equity option contract
generally represent?
Answer: 100 shares.
●● Why are options riskier than owning shares?
Answer: They are leveraged and have expiration dates, so an option can
lose 100% of its premium.
●● What are regular U.S. stock market hours?
Answer: 9:30 AM to 4:00 PM Eastern Time.
●● What is pre-market trading?
,Answer: Trading that occurs before the regular session, commonly
beginning around 4:00 AM ET.
●● What is after-hours trading?
Answer: Trading after the regular session, commonly continuing until
8:00 PM ET.
●● Why can extended-hours trading be riskier?
Answer: Lower liquidity and wider spreads can produce greater
volatility and slippage.
●● What is a market order?
Answer: An order designed to execute immediately at the best available
price.
●● What is the main risk of a market order?
Answer: The execution price is not guaranteed.
●● What is a limit order?
Answer: An order that executes only at a specified price or better.
●● What is the main advantage of a limit order?
Answer: Price control.
, ●● What is the main disadvantage of a limit order?
Answer: The order may never execute.
●● What is slippage?
Answer: The difference between the expected execution price and the
actual execution price.
●● What is the bid?
Answer: The highest price a buyer is currently willing to pay.
●● What is the ask?
Answer: The lowest price a seller is currently willing to accept.
●● What is the bid-ask spread?
Answer: The difference between the ask and bid prices.
●● What does a narrow bid-ask spread generally indicate?
Answer: Greater liquidity and lower transaction friction.
●● What is liquidity?
Answer: How easily an asset can be bought or sold without significantly
moving its price.
