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Series 4 – Practice Test 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
Correct Incorrect Correct answer

The client tenders an exercise notice prior to the ex-date
Correct Incorrect Correct answer

Go long the stock on or after the ex-date
Correct Incorrect Correct answer

Correct

Incorrect
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
Correct Incorrect Correct answer

Monthly
Correct Incorrect Correct answer

Quarterly
Correct Incorrect Correct answer

As of the expiration date of the uncovered option position
Correct Incorrect Correct answer

Correct

Incorrect
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
Correct Incorrect Correct answer

Long stock/long put
Correct Incorrect Correct answer

Short stock/long call
Correct Incorrect Correct answer

Correct

Incorrect
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
Correct Incorrect Correct answer

Notify the SRO of the complaint
Correct Incorrect Correct answer

Contact the complainant and make them whole for any losses they have suffered
Correct Incorrect Correct answer

Correct

Incorrect
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
Correct Incorrect Correct answer

Customer complaints
Correct Incorrect Correct answer

Customer account statements
Correct Incorrect Correct answer

Customer confirmation
Correct Incorrect Correct answer

Correct

Incorrect
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
Correct Incorrect Correct answer

Going short against the box
Correct Incorrect Correct answer

Ratio writing
Correct Incorrect Correct answer

Ratio hedging
Correct Incorrect Correct answer

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
Correct Incorrect Correct answer

Short stock/long call
Correct Incorrect Correct answer

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
Correct Incorrect Correct answer

Allowing clerks to execute orders
Correct Incorrect Correct answer

Assigning certain classes of option contracts to a different ‘post’
Correct Incorrect Correct answer

Halting trading in the underlying instrument
Correct Incorrect Correct answer

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
Correct Incorrect Correct answer

An account agreement
Correct Incorrect Correct answer

Written authorization
Correct Incorrect Correct answer

Limited power of attorney
Correct Incorrect Correct answer

Correct

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Quiz Summary

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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?

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:

3. Question

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

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?

5. Question

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

6. Question

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

7. Question

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

8. Question

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

9. Question

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

10. Question

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