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Final Exam Review
| Question | Answer |
|---|---|
| True or False: A covered option is required to have a margin deposit. | False; it does require a deposit since it is a "covered" position. |
| You have a covered call in the following situations: | 1. You own the underlying stock 2. You have a bank escrow agreement 3. You own a call with the same or lower strike price |
| You have a covered put in the following situations: | 1. Have a short position on a stock 2. Have a bank escrow agreement 3. Own a put with the same or higher strike price |
| Investors are uncovered if: | They write a call or a put without owning another position, either in stock or purchased options |
| What is a greenshoe clause? | An agreement between the issuer and the investment banker/underwriter to sell an extra allotment of shares |
| Definition of a REIT | A real estate investment trust invests in a portfolio of real estate with the intention of profiting from rents and the appreciation of the property |
| True or False: REIT's are redeemable | True |
| True or False: REIT's can pass through Capital Gains | True |
| True or False: REIT's can pass through Capital Losses | True |
| True or False: REIT's can pass through Passive Losses | False |
| True or False REIT's can pass through income | True |
| A call with a lower strike price always has a ________ premium than the call with the higher striker price. | Higher |
| True or False: CMO's are not a derivative? | False |
| Are CMO's taxed at the State or Federal Level? | Both |
| CMO tranches are issued in increments of _______ | $1000 |
| True or False: CMO tranches pay interest annually | False, they pay monthly, quarterly, or semi-annually |
| What affects the price of a CMO tranche? | Interest rates |
| When writing out options, if a short position is on the bottom of the two then the position is bullish or bearish? | Bearish |
| When writing out options, if a Long position is on the bottom of the two then the position is bullish or bearish? | Bullish |
| A put with a lower strike price always has a ________ premium than the put with the higher striker price. | lower |
| What two options positions would you purchase to protect your position? | Buy Puts and Sell Calls |
| What options position will help you generate income? | Writing covered calls |
| What options position will protect your position and provide income? | Writing calls against an index |
| What is shorting against the box? | Short selling securities that you already own. |
| What happens with an even stock split? | option contracts up, strike price down, premium price down |
| What two options positions would you purchase to protect your position? | Buy Puts and Sell Calls |
| What options position will help you generate income? | Writing covered calls |
| What options position will help you generate income? | Writing covered calls |
| What is shorting against the box? | Short selling securities that you already own. |
| What happens with an even stock split? | Short selling securities that you already own. |
| What happens with an even stock split? | options contracts same, # of shares goes up, strike price down, premiums down |
| What happens with an odd stock split? | options contracts same, # of shares goes up, strike price down, premiums down |
| FINRA's 5% policy does not apply to: | Primary market trades including mutual funds, or 4th market trades |
| Buy Limit orders are always entered _________ the present market price. | below |
| Buy Limit order take advantage of a _____in prices or buying the stock before it is expected to __________ | dip; rise |
| True or False: A buy limit order can be entered at or below the market price | True |
| Sell limit orders are always entered _________ the market price. | Above |
| A buy stop is placed when a buyer wants to lock in a gain on a _______________ | short sale |
| True or false: Buy stop orders accelerate a bear market | False, the accelerate a bull market |
| A Sell stop is placed when a buyer wants to lock in a gain on a _____________ | long sale |
| True or False: Sell stop orders accelerate a bear market | True |
| What two orders are reduced by the dividend on the ex dividend date? | BLISS Buy Limit/Sell Stop |
| SuperDot is the automatic exchange system for which exchange? | NYSE |
| An order that is entered through SuperDot can be up to _________ shares | 100,000 |
| True or False: OBO's can execute an order from their own book. | False |
| True or False: the Retail Automated Execution System executes stop orders. | False, it only executes market orders and marketable limit orders |
| SOES is an automated execution system owned by _________ for trades of ___________. | Nasdaq; less than 500 shares |
| What is the difference between a Certificate of Limited Partnership, a partner agreement, and a subscription agreement? | Certificate deals with legal matters, partnership outlines relationship between general and limited partners, subscription is informational for potential limited partners. |
| OTCBB is a quotation system for __________ | Non Nasdaq stock |
| TRACE is a quotation system for __________ | corporate debt securities |
| The options disclosure document must be presented when? | Earliest possible time, prior to taliking to the client, prior to opening the account, or before the trade |
| In a discretionary account, a RR can decide __________ and ____________ without having authorization | When; at what price |
| True or False: When a RR has discretionary authority the BOM must approve every trade | True |
| True or False: When a RR has discretionary authority every trade does not need to be marked "discretionary" | False |
| Put these Moody's ratings in order from riskiest to safest: A, Aaa, Aa, A1 | A, A1, Aa, Aaa |
| Municpals are quoted a what percentage? (basis points) | 1/100% |
Created by:
cstrom