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Series 9 Practice Exam 4

Series 9 Practice Exams

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Practice Exam 2
Practice Exam 3
Practice Exam 4

Series 9 Practice Exam 4

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Question 1 of 10

1. Question

Options are typically written in a client’s margin account. Under what conditions may an investor short a put in a cash account?

The client has a short stock position in the account
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There is cash in the account equal to or greater than the aggregate exercise value of the short put contract
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There is at least sufficient cash in the account to meet a Reg. T call
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Puts may not be written in a cash account
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Question 2 of 10

2. Question

Compute the maximum profit, maximum loss, and break-even point for the following strategy: short 1 ZYX Dec 115 put @ 4 and long 1 ZYX Dec 125 put @ 8 with ZYX trading at 119 ½

Unlimited gain; 12,100 max. loss; 111 break-even
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Unlimited loss; 600 maximum gain; 121 break-even
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600 max. gain; 400 max. loss; 119 break-even
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400 max. gain; 600 max. loss; 121 break-even
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Question 3 of 10

3. Question

A customer purchase 500 shares of CBA stock at 55 six months ago and with CBA now trading at 65, purchases a CBA 65 put to lock in the unrealized capital gain. The best answer below is:

This is protective put buying and is a reasonably conservative strategy.
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This will cause the entire six month holding period to be erased.
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The client will need to hold the stock an additional six months and 1 day to establish long term gain status on the stock.
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This is a form of portfolio insurance.
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Question 4 of 10

4. Question

The principal difference between a short straddle and a short combination is that:

The straddle involves a put and a call with the same strike and same expiration whereas the combination alters the strike and/or the expiration.
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The straddle involves a put and a call whereas the combination involves two puts and two calls with differing strikes.
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The straddle is a neutral strategy whereas the combination is either bullish or bearish, depending on the strikes.
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There is no difference between these strategies – just different names
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Question 5 of 10

5. Question

One of your option customers has the following positions in their account: 1 LMN May 55 call @ 4 pts. and 1 LMN May 45 put @ 4 ½ pts. with LMN trading currently at 49.80 on the NYSE. Which statement below is untrue?

This is a long combination
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The maximum profit will be realized if LMN declines below 36 ½.
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The client believes LMN is expected to be highly volatile
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There are two break-even points for this position
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Question 6 of 10

6. Question

All executed orders are to be reviewed each day by the Branch Manager of the office. According to FINRA rules,

The BOM must initial each executed order by the end of the trade date.
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Registered representatives may initial executed orders which took place in their customers’ accounts.
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At a minimum, discretionary orders must be individually initialed by the BOM by the end of the trade date.
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Member firms may have WSPs which permit the BOM to initial executed order tickets on a partial basis each day, so long as the firm remains responsible for assuring compliance with FINRA’s record-keeping and suitability rules for all executed orders.
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Question 7 of 10

7. Question

Each OSJ of a member firm must be inspected by a senior compliance principal at least:

Once every 4 years
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Once every 2 years
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Once every year
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Semi-annually
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Question 8 of 10

8. Question

Assignment of exercise notices is handled by and the responsibility of the:

Options Clearing Corporation
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CBOE or other options exchange
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Member firm representing the client exercising their long position
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All of the above
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Question 9 of 10

9. Question

Exercise by exception occurs when a:

Short position is in the money at expiration by at least the amount of the premium that had been received when written.
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Short position is in the money at expiration by at least 1 penny per share.
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Short has been closed out just prior to expiration.
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Long position is in the money at expiration and the investor has chosen not to exercise the contract.
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Question 10 of 10

10. Question

In accordance with FINRA rules and interpretations, reverse convertible securities:

Are generally deemed suitable in tax-deferred retirement accounts.
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Are an exchanged traded product (ETP)
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Required customers to be cleared for uncovered put writing to be eligible to purchase these securities.
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All of the above
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