17 Options Trader Interview Questions and Answers

An options trader is a financial professional who buys and sells options contracts on behalf of clients or for his or her own benefit. Options traders typically work for banks, hedge funds, or investment firms. They may also trade options contracts on their own behalf.

If you want to become an options trader, you will need to have a strong understanding of the options market and the ability to make quick, informed decisions. You will also need to be comfortable with risk. Before you can start trading options, you will likely need to go through an interview process.

In this guide, we will provide some sample options trader interview questions and answers. We will also give you some tips on how to prepare for your interview and what to expect.

Are you familiar with the Black-Scholes options pricing model?

Options traders need to understand the basics of options pricing. The Black-Scholes model is a widely used formula for determining the price of an option, and your interviewer may ask this question to see if you have experience using it. If you do, share how you use it in your current role or describe what you would do with it as part of your new job.

Example: “I’ve worked with the Black-Scholes model before, but I don’t rely on it exclusively. It’s important to know the basics of the model so that I can make sure my calculations are accurate, but I also like to look at other factors when making pricing decisions. For example, I might consider the volatility of the underlying asset, time until expiration and interest rates.”

What are the primary factors that determine the price of an options contract?

Options traders must understand the factors that affect the price of an options contract. This question helps you show your interviewer that you have a strong understanding of how to determine the value of an options contract and can use this information to help make decisions about which contracts to buy or sell. In your answer, explain what each factor is and how it affects the price of an options contract.

Example: “There are several factors that determine the price of an options contract. The primary factors include the strike price, volatility, time until expiration and interest rates. Strike price refers to the price at which the underlying asset can be purchased or sold. Volatility refers to the amount of uncertainty in the market regarding the price of the underlying asset. Time until expiration refers to the length of time before the option expires. Interest rates refer to the rate of return on money.”

How do you determine the best time to sell an options contract?

This question can help the interviewer assess your decision-making skills and ability to analyze market trends. Use examples from past experiences where you’ve successfully determined when to sell an options contract for a profit.

Example: “I look at several factors before deciding whether or not to sell an option contract. First, I consider how volatile the underlying asset is. If it’s highly volatile, then I may want to hold on to my position until volatility decreases. Next, I look at the time remaining in the contract. If there are only a few days left, then I may decide to hold off selling because the price could increase by expiration. Finally, I look at the strike price of the contract. If the strike price is far away from the current market value, then I may also choose to wait until expiration.”

What is the difference between a call option and a put option?

Options traders need to understand the differences between various options contracts. Your answer should show that you know how each contract works and what factors affect their value. You can use examples from your previous experience to explain the difference between these two types of options.

Example: “A call option gives its owner the right, but not the obligation, to buy a stock at a specific price within a certain time frame. A put option is the opposite—it allows the owner to sell a stock at a specific price within a certain time frame. The main difference between these two options is that with a call option, I have the right to buy something, while with a put option, I have the right to sell something.”

Provide an example of a situation where you would use a call option.

Options traders use call options to buy a stock at a specific price. This is an effective strategy for investors who want to purchase stocks in the future at a lower cost than current market value. When answering this question, you can provide an example of when you used a call option and how it benefited your company or organization.

Example: “I once worked with a client who wanted to invest in a particular stock but didn’t have enough money to purchase it outright. I recommended that they use a call option to buy the stock at a later date at a predetermined price. They agreed, and we set up a contract where they would pay me $10 per share if they decided to exercise their right to buy the stock at $20 per share.”

If you owned a stock and wanted to protect your investment, what strategy would you use?

Options traders often need to know how to protect their investments. This question helps the interviewer determine your knowledge of different strategies and whether you have used them in the past. In your answer, explain what strategy you would use and why it’s effective.

Example: “If I owned a stock that was expected to rise but wanted to protect my investment, I would sell a put option on that stock. If the stock price fell below the strike price before expiration, then I would be obligated to buy the stock at the agreed-upon price. However, if the stock rose above the strike price, I wouldn’t be required to purchase it.”

What would you do if you purchased an options contract and the underlying asset started to plummet in value?

Options traders sometimes have to make decisions about whether or not to close out their contracts before the expiration date. This question helps employers understand how you would react in a challenging situation and if you can think critically under pressure. In your answer, explain what steps you would take to evaluate the situation and decide on an appropriate course of action.

Example: “If I purchased an options contract and the underlying asset started to plummet in value, I would first assess why this was happening. If it was due to external factors, such as a natural disaster, then I would likely hold onto my position until the contract expired. However, if there were internal reasons for the drop in value, such as a company-wide scandal, then I would probably want to get out of the contract as soon as possible.”

How well do you perform under pressure?

Options traders often work in high-pressure environments. Employers ask this question to make sure you can handle the stress of the job. In your answer, explain how you manage pressure and give an example of a time when you performed well under pressure.

Example: “I thrive under pressure because I know that it’s usually my best work that comes out of those situations. When I’m working on a tight deadline, I try to focus on one thing at a time. This helps me stay organized and ensures that I don’t miss any important details. Last year, we had a client who needed to close a trade by the end of the day. I was able to complete the transaction before the market closed.”

Do you enjoy working with other traders?

Options traders often work in teams, so employers ask this question to make sure you’re comfortable collaborating with others. In your answer, explain that you enjoy working with other people and are willing to take on a supporting role if necessary.

Example: “I love working with other people because it allows me to learn from their experiences. I’ve found that my colleagues have taught me many valuable lessons about the industry, which has helped me become an effective trader. When I first started out, I was eager to prove myself as a successful trader, so I would sometimes try to do everything by myself. However, I learned that having a team of experienced traders is much more beneficial than trying to go at it alone.”

When is it appropriate to use a margin account to purchase options?

Options traders use margin accounts to purchase options when they want to control a large number of shares in a company. This is often done by investors who are looking for long-term growth opportunities and expect the price of their stock to increase over time. When answering this question, it can be helpful to provide an example of how you would use a margin account to purchase options.

Example: “I only use margin accounts when I’m purchasing call or put options that have strike prices that are significantly higher than the current market value of the underlying asset. For instance, if I wanted to buy 100 shares of XYZ Company at $50 per share but the current market value was $45 per share, I would use a margin account to purchase the option because it would allow me to control more shares at a lower cost.”

We want to expand our options trading capabilities. Why should we hire you?

This question is an opportunity to show your knowledge of the company and how you can help them achieve their goals. You should highlight any experience or skills that will be useful in helping the company expand its options trading capabilities.

Example: “I have extensive experience with both stock and options trading, which would make me a valuable asset to your team. I also have several connections within the industry who could provide additional information about new products and services that may be beneficial for your company. Finally, my ability to work independently and solve problems creatively would allow me to take on more responsibilities as the company expands.”

Describe your experience with using computer programs to analyze data.

Options traders use computer programs to analyze data and make decisions about which options to buy or sell. The interviewer may ask this question to learn more about your experience with using software that can help you succeed in the role. In your answer, describe a time when you used a program to complete an important task. Explain how it helped you achieve your goals.

Example: “I have extensive experience using Excel for my work as an accountant. I regularly use formulas within Excel to calculate different financial metrics. For example, I once calculated the total cost of goods sold for a company by using Excel’s SUM function. This information was helpful for the CFO because he could see where the company needed to improve its margins.”

What makes you stand out from other options traders?

This question is a great way to show your interviewer that you have unique skills and talents. You can answer this question by describing a skill or talent that makes you an effective options trader.

Example: “I think what makes me stand out from other traders is my ability to make quick decisions under pressure. I’ve been in situations where the market was volatile, and I had to decide whether to buy or sell quickly. My experience has taught me how to make these decisions with confidence, which helps me keep my clients happy.”

Which industries do you have the most experience working with?

Options traders often work with a variety of industries, including financial services, technology and retail. The interviewer may ask this question to see if you have experience working in their industry. Before your interview, read through the job description to find out which industries the company works with most. In your answer, explain why these industries interest you and how they relate to your own career goals.

Example: “I’ve worked primarily with the tech industry for my entire career as an options trader. I love the fast-paced nature of the tech industry and the innovative ideas that companies are always coming up with. I also think it’s important to diversify my portfolio by working with different industries. That way, I can learn more about other types of businesses and expand my knowledge.”

What do you think is the most important skill for an options trader to have?

This question can help the interviewer determine what skills you have that are relevant to this role. Use your answer to highlight a skill that you feel is important for options traders and explain why it’s beneficial.

Example: “I think the most important skill for an options trader to have is math ability. This is because I believe that being able to calculate numbers quickly and accurately is essential when trading in this position. In my last role, I was responsible for calculating how much money we would make on our trades each day, which required me to use math extensively. I am confident in my math abilities, so I always made sure to double-check my work before submitting it.”

How often do you make trades each month?

This question can help the interviewer understand how much work you do each month. They may also want to know if your workload is consistent or changes from month to month. In your answer, try to be as honest as possible about how often you make trades and why that’s the case.

Example: “I usually make between five and 10 trades per month. I find this number of trades helps me stay focused on my work while still making enough money to meet my goals. However, sometimes there are months where I make more trades than usual. For example, last year I made 20 trades in one month because I was working toward a goal. I like having these types of goals so I can keep motivated.”

There is a high volume of trades happening on the trading floor. How do you stay focused?

Options trading requires a lot of concentration. The interviewer wants to know how you will handle the high volume of trades and other distractions that may occur on the floor. Your answer should show your ability to focus in an environment with many distractions.

Example: “I have worked in environments where there were multiple distractions, so I am used to focusing despite them. When I first started working as an options trader, I would get distracted by all the noise around me. However, after some time, I learned to tune out most of the distractions and only pay attention to what is important. Now, I can focus even when there are loud conversations happening around me.”