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Series 4 Practice Exam 1

Series 4 Practice Exams

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Series 4 Practice Exam 1

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Question 1 of 10

1. Question

In the instance in which a retail customer wishes to open an account to conduct options trading activities, the account must be approved:

Not later than at the time the initial order is accepted
Correct Incorrect Correct answer

At or prior to the time the ODD is furnished to the customer
Correct Incorrect Correct answer

Prior to the acceptance of the initial order
Correct Incorrect Correct answer

Within 15 calendar days of the initial trade in the account
Correct Incorrect Correct answer

Correct

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Question 2 of 10

2. Question

The Options Clearing Corporation can most accurately be portrayed as fulfilling which of the below duties?

It provides certificates to evidence both long and short option positions
Correct Incorrect Correct answer

It provides a fair and orderly market for the trading of option contracts
Correct Incorrect Correct answer

It assures clearing member firms that option contracts will be honored when exercised
Correct Incorrect Correct answer

It assigns exercise notifications to investors
Correct Incorrect Correct answer

Correct

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Question 3 of 10

3. Question

In accordance with the uniform practice code pertaining to the contents of confirmations, which of the below information is required on an option confirmation form?

Whether the trade is an opening or closing transaction
Correct Incorrect Correct answer

The aggregate exercise price
Correct Incorrect Correct answer

The precise time of execution of the transaction
Correct Incorrect Correct answer

Whether the transaction is the initial transaction in the account
Correct Incorrect Correct answer

Correct

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Question 4 of 10

4. Question

If an option client is long 1 RAL Nov 85 put contract, to create a bullish vertical spread would require which of the following actions?

Go long a different option type
Correct Incorrect Correct answer

Go short a different option type
Correct Incorrect Correct answer

Go long a different option series
Correct Incorrect Correct answer

Go short a different option series
Correct Incorrect Correct answer

Correct

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Question 5 of 10

5. Question

When a member firm is disseminating recordings to clients encouraging them to consider options strategies to enhance their portfolio returns:

ROP approval is not a requirement
Correct Incorrect Correct answer

BOM review is mandatory
Correct Incorrect Correct answer

These are deemed retail communications requiring SRO approval
Correct Incorrect Correct answer

OCC review and approval is required
Correct Incorrect Correct answer

Correct

Incorrect
Question 6 of 10

6. Question

A hedging strategy suitable for an import/export business which expects to be paid in a specific foreign currency would most likely be:

Long straddles in the options of that foreign currency
Correct Incorrect Correct answer

Long puts in that foreign currency
Correct Incorrect Correct answer

Long calls in that foreign currency
Correct Incorrect Correct answer

Collars in that foreign currency
Correct Incorrect Correct answer

Correct

Incorrect
Question 7 of 10

7. Question

An option trader looking to reduce their short option position would be well advised to place which of the below orders?

Closing purchase
Correct Incorrect Correct answer

Closing sale
Correct Incorrect Correct answer

Opening purchase
Correct Incorrect Correct answer

Closing their account
Correct Incorrect Correct answer

Correct

Incorrect
Question 8 of 10

8. Question

On March 1st, a client purchases 20 call option contracts as their initial transaction in their option account. On March 20th, the client wishes to enter a closing sale transaction of those 20 contracts; however, the client has not signed and returned the special option agreement form.

The trade cannot be processed
Correct Incorrect Correct answer

The client’s account will be closed
Correct Incorrect Correct answer

The transaction can be processed as requested
Correct Incorrect Correct answer

None of the above
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Correct

Incorrect
Question 9 of 10

9. Question

If a customer has an already-established brokerage account at your firm, and they have granted written discretionary authority to the RR handling the account, should the customer wish to engage in covered options strategies:

No further discretionary authorization is required
Correct Incorrect Correct answer

An additional discretionary authorization is required to initiate options activity
Correct Incorrect Correct answer

Verbal discretion would be sufficient for each option transaction
Correct Incorrect Correct answer

Discretionary trading is not permitted for options trading of any kind
Correct Incorrect Correct answer

Correct

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Question 10 of 10

10. Question

A long put position is basically the risk-equivalent of which of the following?

A short call
Correct Incorrect Correct answer

Long stock/long put
Correct Incorrect Correct answer

Short stock/short put
Correct Incorrect Correct answer

Short stock/long call
Correct Incorrect Correct answer

Correct

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