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Series 4 Practice Exam 2

Series 4 Practice Exams

Practice Exam 1
Practice Exam 2
Practice Exam 3

Series 4 Practice Exam 2

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Question 1 of 10

1. Question

A client with a long call position will qualify to receive a cash dividend on the underlying shares of stock under which of these conditions?

The client engages in a closing sale transaction prior to the ex-date
Correct Incorrect Correct answer

The client tenders an exercise notice on or after the ex-date
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The client tenders an exercise notice prior to the ex-date
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Go long the stock on or after the ex-date
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Correct

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Question 2 of 10

2. Question

In accordance with SRO uniform practice code requirements pertaining to customer account statements, uncovered option positions held in client accounts must be reported to the client:

Weekly
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Monthly
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Quarterly
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As of the expiration date of the uncovered option position
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Correct

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Question 3 of 10

3. Question

A short call position has a risk-equivalency of which of the below?

Long put
Correct Incorrect Correct answer

Short stock/short put
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Long stock/long put
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Short stock/long call
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Correct

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Question 4 of 10

4. Question

An option customer has sent a letter of complaint to your branch. Which of the following will be the appropriate way to handle the complaint?

Send the complaint to the firm’s central file within 30 days and maintain a copy of the letter of complaint in the branch
Correct Incorrect Correct answer

Initiate arbitration proceedings
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Notify the SRO of the complaint
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Contact the complainant and make them whole for any losses they have suffered
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Correct

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Question 5 of 10

5. Question

All of the below records must be maintained at the branch level as well as the principal supervisory office level, except:

Background information regarding customers
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Customer complaints
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Customer account statements
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Customer confirmation
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Correct

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Question 6 of 10

6. Question

When a customer who is long 1000 shares of ABC common shorts 15 calls, this is most commonly referred to as:

Short hedging
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Going short against the box
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Ratio writing
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Ratio hedging
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Correct

Incorrect
Question 7 of 10

7. Question

A long call has a risk-equivalency of which of these positions?

Long stock/long put
Correct Incorrect Correct answer

Long stock/short call
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Short stock/long call
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Short put
Correct Incorrect Correct answer

Correct

Incorrect
Question 8 of 10

8. Question

The automatic exercise by exclusion rules of the CBOE are best described as:

Requiring all out of the money contracts be allowed to expire
Correct Incorrect Correct answer

Requiring all in the money contracts be exercised at expiry
Correct Incorrect Correct answer

Requiring all in the money contracts be exercised at expiry in the absence of an exception notification from the client with the expiring long position
Correct Incorrect Correct answer

Requiring all short option positions be exercised where the underlying stock is in the money by the strike price plus premium in the case of a call, and strike price minus premium in the case of a put
Correct Incorrect Correct answer

Correct

Incorrect
Question 9 of 10

9. Question

In a ‘fast’ market, all of the following actions by floor officials will be permissible except:

Suspending the firm quote rule
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Allowing clerks to execute orders
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Assigning certain classes of option contracts to a different ‘post’
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Halting trading in the underlying instrument
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Correct

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Question 10 of 10

10. Question

In order to open a discretionary options account, all of the below would be a requirement except:

A margin agreement
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An account agreement
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Written authorization
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Limited power of attorney
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Correct

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