Alpha AcademyTeam Alpha Trading

Level 1 Final Exam · Answer Key 2 of 2

Final Exam — Answer Key

Every answer explained in one line — and where to re-study what you missed.

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This is the grading key for the Alpha Academy Final Exam. Keep it separate from the exam itself — a student should never see this file before (or while) taking the test.

Scoring: 40 or more correct out of 50 = pass (80%). Below 40, the review map at the bottom of this key shows exactly which modules to re-read before a retake.

The Answers

  • 1. B — A small ownership piece of a company. A share is a slice of ownership. Unlike a loan, the company owes you nothing back.
  • 2. A — Share price × shares outstanding. That one multiplication is the company's total market value.
  • 3. C — An index: a scoreboard tracking 500 large US companies. You cannot buy an index itself; you trade ETFs, futures, or options based on it.
  • 4. A — The highest price a buyer is willing to pay right now. The ask is the sellers' side; the gap between bid and ask is the spread.
  • 5. D — Buy at your set price or better, never worse than your limit. A market order takes whatever price is available; a limit order sets your ceiling.
  • 6. B — An ETF trades all day like a stock; a mutual fund prices once after the close. Same basket idea, different trading mechanics.
  • 7. A — A cash payment a company may choose to send shareholders; never guaranteed. A company can cut or skip its dividend at any time.
  • 8. C — 9:30 AM to 4:00 PM Eastern Time. That is the regular session; pre-market and after-hours exist but are thinner and wilder.
  • 9. D — Closed higher than it opened. Green says nothing about tomorrow; it only reports what that candle did.
  • 10. B — How many shares changed hands during that period. Volume measures participation — how real the crowd behind a move is.
  • 11. A — Price has repeatedly stopped falling and bounced back up. Support is a floor price has tested; it is a tendency, never a guarantee.
  • 12. C — It smooths price movement so the trend is easier to see. An average describes the trend; it does not predict prices or protect you.
  • 13. D — "Overbought" by convention: stretched, not guaranteed to reverse. Above 70 is a custom, not a law — strong trends can stay stretched for days.
  • 14. B — The average price paid so far today, weighted by volume. VWAP is the day's fair-price line: above it buyers are in control, below it sellers are.
  • 15. C — 20. P/E = price ÷ EPS = $30 ÷ $1.50 = 20. You are paying $20 for each $1 of yearly earnings.
  • 16. C — A fear gauge built from options prices, showing expected volatility. The VIX rises when traders pay up for protection.
  • 17. A — The right to buy 100 shares at the strike price. A put is the mirror image: the right to sell at the strike.
  • 18. C — $250. Premium is quoted per share and one contract covers 100 shares: $2.50 × 100 = $250.
  • 19. D — The premium you paid, and nothing more. A buyer's risk is capped at the premium; a seller's risk is the large, open-ended side.
  • 20. B — Out of the money. The stock ($95) sits below the call's strike ($100), so exercising today would buy above the market price.
  • 21. C — Own 100 shares and sell a call against those shares. The shares "cover" the call — that is what makes it covered.
  • 22. A — $52.50. Call breakeven = strike + premium = $50 + $2.50 = $52.50.
  • 23. D — $800. At expiration the put is worth strike − stock price = $60 − $52 = $8 per share × 100 shares = $800.
  • 24. B — $1.20 per share. Extrinsic value = premium − intrinsic value = $3.20 − $2.00 = $1.20 — the part that melts away by expiration.
  • 25. C — Insurance for shares you own, the way insurance protects a house. It caps your downside for a premium; it does not promise a profit.
  • 26. A — IV crush. Event premiums carry a fear surcharge; once the news prints, implied volatility collapses and can erase a correct call's gains.
  • 27. C — $1.20 per share, about $120 per contract. Delta math: 0.60 × $2 stock move = $1.20 per share × 100 shares = $120.
  • 28. D — $820. Max profit on a debit spread = width − debit = ($110 − $100) − $1.80 = $8.20 per share × 100 = $820.
  • 29. B — An agreement to buy or sell something at a set price on a future date. That locked-in future price is the entire idea — it began with farmers and bakers.
  • 30. A — A good-faith deposit, not a loan. Futures margin posts your own money as a performance deposit; nobody lends you anything and no interest is charged on it.
  • 31. C — $50. MES is worth $5 per point: 10 points × $5 = $50.
  • 32. D — $200. NQ is worth $20 per point: 10 points × $20 = $200.
  • 33. B — $400. ES is worth $50 per point: 8 points × $50 = $400 — leverage magnifies losses exactly like gains.
  • 34. A — $2,000. CL is worth $1,000 per point: 2 points × $1,000 = $2,000. One contract controls 1,000 barrels.
  • 35. C — Bond prices fell. Prices and yields move in opposite directions, like a seesaw: "yields rose" always means prices dropped.
  • 36. D — 50 pips. A pip is 0.0001 for most pairs; 1.1050 − 1.1000 = 0.0050 = 50 pips.
  • 37. A — A pre-set exit that closes your trade at your planned loss level. A stop limits damage; it cannot guarantee a fill price in a fast market or a gap.
  • 38. C — Trading bigger and angrier right after a loss, trying to win it back immediately. Revenge trading turns one planned loss into an emotional spiral.
  • 39. B — $100. The 1% rule: 1% of $10,000 = $100 maximum risk on any single trade.
  • 40. D — 50 shares. Risk per share = $40 − $38 = $2; shares = $100 ÷ $2 = 50.
  • 41. A — +2.5R. R is your planned risk ($100); $250 ÷ $100 = 2.5, so the trade earned two and a half times what you risked.
  • 42. C — 100%. After losing half, only half remains, so it must double — losses dig holes that get deeper faster than they look.
  • 43. B — The fear of missing out: jumping into a move late because everyone else seems to be making money. FOMO buys other people's exits at the worst prices.
  • 44. D — Stop trading for the day. The daily loss limit exists to protect you from emotional trading; no single setup outranks a rule you wrote while calm.
  • 45. A — A cash account trades only your own settled money; a margin account lets you borrow from the broker. Borrowed money means interest — and the broker can force sales if your equity falls too low.
  • 46. C — Money and shares officially settle one business day after the trade. T+1 has been the US standard since May 2024.
  • 47. B — The broker's demand to restore your equity, with the power to sell your positions if you do not act. A margin call is not a suggestion and not a stock tip.
  • 48. D — At least $25,000 in account equity under the classic rule — and you should check your broker's current rule. Regulators have been replacing the classic PDT rule with intraday-margin standards, and brokers are transitioning.
  • 49. A — The $400 loss is disallowed for now, because you rebought within 30 days after the sale. June 25 is inside the 61-day wash sale window (30 days before and after the June 10 sale).
  • 50. C — A pump-and-dump. Hype inflates the price, the promoter dumps his shares into the buying, and the crowd is left holding the fall. Anyone guaranteeing profits is lying.

How to Review What You Missed

Do not just re-take the exam. Find the part where your misses cluster, re-read those modules, redo each module's own Check Yourself questions, and only then take the exam again.