Options
A customer buys a call option. This value reflects how much the option is in-the-money.
What is: Intrinsic value
A call option is in-the-money when:
A. Market price < strike
B. Market price = strike
C. Market price > strike
D. Time value = 0
What is when the market price is above the strike price?
During the cooling-off period, which action is permitted?
A. Accepting funds
B. Selling securities
C. Delivering final prospectus
D. Oral offers
What are oral offers?
This yield accounts for interest, reinvestment, and time to maturity.
What is yield to maturity?
Diversification reduces this type of risk.
What is unsystematic risk?
A market order guarantees:
A. Price
B. Execution
C. Settlement
D. Profit
What is execution?
A long call has which of the following risk/reward profiles?
A. Limited gain / limited loss
B. Unlimited gain / limited loss
C. Limited gain / unlimited loss
D. Unlimited gain / unlimited loss
What is: B
This order closes out an existing options position
What is a closing transaction?
This underwriting arrangement places sales risk on the underwriter.
What is a firm commitment?
Which risk cannot be diversified away?
A. Business risk
B. Liquidity risk
C. Unsystematic risk
D. Systematic risk
What is systematic risk?
Beta measures a security’s:
A. Credit risk
B. Market volatility
C. Liquidity
D. Yield
What is market volatility?
A sell stop order is triggered when the price:
What is when the price falls to the stop price?
This option strategy profits from high volatility regardless of direction.
What is: Long straddle
Which strategy benefits from a sharp downward move?
A. Long call
B. Short put
C. Long put
D. Covered call
What is a long put?
Regulation D offerings are exempt from registration but subject to:
A. Suitability rules
B. Antifraud provisions
C. Margin rules
D. Prospectus delivery
What are antifraud provisions?
Inflation risk is also known as this.
What is purchasing power risk?
ROE is calculated as:
A. Net income ÷ assets
B. Net income ÷ equity
C. Assets ÷ liabilities
D. Equity ÷ income
What is net income divided by equity?
Regulation SHO governs:
A. Best execution
B. Short selling
C. IPO allocations
D. Insider trading
What is short selling?
The breakeven on a long put is calculated as:
A. Strike + premium
B. Market price − premium
C. Strike − premium
D. Strike ÷ premium
What is: C
This Greek measures how much an option price changes relative to the stock price.
What is delta?
This exemption allows resale of private securities to QIBs.
What is Rule 144A?
Duration MOST directly measures:
A. Yield
B. Credit quality
C. Price volatility
D. Liquidity
What is price volatility?
This financial statement shows revenues and expenses over time.
What is the income statement?
This order provides price protection but no execution guarantee.
What is a limit order?
This spread involves buying a lower-strike call and selling a higher-strike call.
What is: Bull call spread
This option value exists only before expiration.
What is time value?
This document contains preliminary information and has red lettering on the cover.
What is a red herring?
A mark-up on a confirmation indicates the firm acted as:
A. Agent
B. Fiduciary
C. Principal
D. Custodian
What is a principal?
Which index is price-weighted?
A. S&P 500
B. Russell 2000
C. Nasdaq Composite
D. Dow Jones Industrial Average
What is the Dow Jones Industrial Average?
A firm trading from its own inventory acts as:
A. Agent
B. Broker
C. Principal
D. Market center
What is a principal?
Which option position has unlimited loss potential?
A. Long call
B. Long put
C. Short call
D. Long straddle
What is: C
A ratio call spread involves selling more calls than are purchased, creating this risk.
What is unlimited risk?
Which person is restricted from purchasing IPO shares?
A. Public customer
B. Accredited investor
C. Registered representative
D. Institutional investor
What is a registered representative?
This FINRA rule allows temporary holds for suspected senior exploitation.
What is FINRA Rule 2165?
EPS is calculated using this formula.
What is net income divided by shares outstanding?
This regulation enforces best price routing across markets.
What is Regulation NMS?
Time value of an option erodes most rapidly during this period.
What is: Near expiration
Which option is exercised automatically at expiration if in-the-money?
A. American
B. European
C. OTC
D. Equity option
What is an American option?
This rule governs who may buy IPOs.
What is the New Issue Rule?
Which security is MOST affected by interest-rate risk?
A. Treasury bill
B. Long-term bond
C. Preferred stock
D. Money market fund
What is a long-term bond?
A high P/E ratio usually indicates expectations of:
A. Declining earnings
B. High debt
C. Future growth
D. Bankruptcy
What is future growth?
Front-running is BEST described as:
A. Legal arbitrage
B. Trading ahead of customer orders
C. Market making
D. Stabilization
What is trading ahead of customer orders?
A. Long straddle
B. Short straddle
C. Long call
D. Protective put
A
What is a short straddle?
A protective put consists of:
A. Long stock + long call
B. Long stock + long put
C. Short stock + long call
D. Short stock + long put
What is long stock combined with a long put?
Regulation S applies to securities offered:
A. To accredited investors only
B. Offshore to non-U.S. investors
C. To institutions
D. Through private placements
What are offshore offerings to non-U.S. investors?
This distribution reduces cost basis rather than creating income.
What is return of capital?
This ratio measures short-term liquidity.
What is the current ratio?
This entity guarantees trade completion after execution.
What is a clearing corporation?
This options position combines stock ownership with a short call.
What is a covered call?
Which option position has a maximum loss equal to the premium paid?
A. Short call
B. Short put
C. Long call
D. Covered call
What is a long call?
Municipal bonds are exempt from which Act?
A. 1934 Act
B. 1940 Act
C. 1933 Act registration
D. FINRA rules
What is the Securities Act of 1933?
Which yield is lowest on a premium bond?
A. Coupon
B. Current yield
C. Yield to maturity
D. Nominal yield
What is yield to maturity?
Fundamental analysis focuses MOST on:
A. Charts
B. Volume
C. Financial statements
D. Moving averages
What are financial statements?
A fill-or-kill order must be:
A. Partially filled
B. Filled over time
C. Filled immediately in full
D. Held until close
What is filled immediately in full?
Which options strategy generates income but caps upside potential?
A. Long call
B. Protective put
C. Covered call
D. Long straddle
What is a covered call?
This options strategy is bearish and has limited risk and limited gain.
What is a bear put spread?
This clause allows underwriters to sell up to 15% more shares.
What is a green shoe clause?
This system excludes annuities during account transfers.
What is ACATS?
This SEC filing contains audited financials and MD&A.
What is Form 10-K?
Market-wide circuit breakers are triggered by:
What are major index percentage declines?