What is the term for the graphical representation of how implied volatility for options of the same underlying asset and expiry date often differs in reality?

Volatility Cone Volatility Smile Implied Volatility Curve Delta Surface

What does the Volatility Cone help traders evaluate?

The future direction of stock prices The costliness of an option The likelihood of a market crash The optimal time to exercise an option

According to the text, what type of option strategy benefits from low implied volatility?

Covered Call Long Straddle Bull Call Spread Protective Put

Which of the following is NOT a characteristic of Gamma?

It measures the rate of change of delta It is always a positive number for both Calls and Puts It tends to be higher for deep out-of-the-money options It can translate to large directional risk

As an option approaches its expiry date, what happens to the Gamma of an at-the-money (ATM) option?

It gradually decreases to zero It remains relatively constant It increases drastically It fluctuates unpredictably

How does the delta of an option behave when implied volatility is high?

The delta of out-of-the-money options goes to zero The delta becomes less sensitive to changes in the underlying price A larger range of options around ATM are sensitive to spot price changes The delta of in-the-money options decreases significantly

What insight does the Volatility Cone provide about implied volatility?

It predicts the future direction of implied volatility It compares current implied volatility to historical realized volatility It identifies the optimal strike price for option trading It calculates the expected return from an option strategy

According to the text, what type of options tend to have a non-zero delta value even when they are far out-of-the-money, especially when volatility is high?

Call options Put options Both Call and Put options Neither Call nor Put options