Sales & Trading
16 options questions of the kind asked in sales & trading interviews. Each carries a model answer, the concepts a complete response must hit, and graded feedback on your own attempt.
A first-round options screen for candidates who have not yet traded derivatives.
A client buys one call option and one put option, each on the same stock with a strike price of $100. Explain what each contract gives the buyer, who has the obligation, and what happens at expiry if the stock closes at…
A foundational derivatives question used to check that a candidate can read an option screen correctly.
A stock trades at $92. Classify a $85 call, a $100 call, a $85 put, and a $100 put as in, at, or out of the money. Which positions have intrinsic value today, and why can an out-of-the-money option still be worth money?
A structuring interview uses this to test whether the candidate can distinguish a conditional rates hedge from a binding swap.
A company expects to issue fixed-rate debt in six months to finance an acquisition, but the acquisition may not close. It is worried that interest rates will rise before then. Explain why a payer swaption may fit better…
A standard analyst-level structuring exercise for a corporate client protecting an equity holding or foreign-currency exposure.
A client owns a stock at $100 and wants protection below $90 for the next year, but will give up gains above $115. Construct the option strategy, describe the stock-plus-options payoff at $70, $100, and $130, and explain…
A desk arithmetic check after a candidate explains delta conceptually.
A dealer has sold 100 call-option contracts. Each contract covers 100 shares and each call has a delta of 0.60. How many shares should the dealer buy or sell to be delta neutral? If the stock rises and the option delta…
An FX-options interview uses this to test whether you understand how option risk becomes spot risk on a dealer book.
A dealer sells a client a EUR/USD call with a delta of 0.40 on €10m notional. How should the dealer initially hedge the spot exposure, and what changes if EUR/USD rises?
Volatility desks use this to test whether candidates understand what an option seller is actually betting on.
A dealer sells a one-month at-the-money straddle at 30% implied volatility and delta-hedges it daily. Realised volatility over the month is 20%, with no jump large enough to disrupt hedging. Did the dealer make or lose…
A prop-trading technical round checks whether you can construct a hedge from payoffs rather than memorise Greeks.
A stock is $100 today. Tomorrow it will be either $120 or $90. A call with a $100 strike pays $20 in the up state and $0 in the down state. How many shares hedge one short call in this one-period model?
Trading interviews use this to test whether you can construct an arbitrage on the spot.
State put-call parity. A stock trades at $100. The $100 strike call trades at $8, the put at $5, and the risk-free rate is 4% with 1 year to expiry, no dividends. Is there an arbitrage? If so, construct it.
Standard for derivatives desks and quant trading interviews.
Name the inputs to the Black-Scholes model and the direction each moves a call option's price. Which input is not observable, and what does that imply?
Options market making interviews probe what you do when you cannot hedge continuously.
You're short gamma into the close, with earnings after the bell. What are your options, and what do you do?
An offer-ready equities-volatility case that tests event-risk arithmetic, distribution thinking and disciplined trade selection.
A $100 stock reports earnings tomorrow. The at-the-money straddle costs $8, implying an approximately 8% move, while the stock's last eight earnings moves were 3%, 4%, 5%, 6%, 7%, 9%, 12% and 15%. Would you buy or sell…
Market-making interviews will push hard on gamma.
Define delta and gamma. You are short a straddle and delta-hedged. Explain what happens to your position as the underlying moves, and what you're actually long or short.
Volatility desks ask this after the skew question.
Implied volatility differs across expiries as well as strikes. What does an upward-sloping vol term structure mean, and what does it mean when it inverts?
A risk-management question for event-driven macro trading.
You have a strong view that a central bank meeting will surprise dovishly, but the outcome is binary. Why might options be better than futures?
Volatility desks ask this to see whether you understand the market, not the model.
Equity index options show higher implied volatility for downside strikes than upside. Explain why the skew exists and what it tells you about the market's assumptions.
Write your answer, get it graded on technical accuracy, completeness and communication, and see exactly which mechanic you missed.
Firm names indicate where a question type is commonly reported in interviews. They are not sourced from, endorsed by, or affiliated with the firms named.