Term
|
Definition
|
|
Term
| What is the best outcome for an investor in a short straddle? |
|
Definition
| The investor with a short straddle would like the market price to close at the money, in order to keep all the premiums. |
|
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Term
| If an investor wants total safety with some income, what are the best investments? |
|
Definition
| Treasury notes and bonds because of fixed interest rates and principal is safe because of gov guarantee. |
|
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Term
|
Definition
| Buyers pay the ask price, sellers receive the bid price. |
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|
Term
| Long straddles are profitable when? |
|
Definition
| When they are outside the break evens. |
|
|
Term
| What does the change column represent a bond chart? |
|
Definition
| The change column is always reflecting the bid price. YTM is always calculated on the asking price. |
|
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Term
| When must option agreements be received by the member firm. |
|
Definition
| Must be received within 15 calendar days (not business days) |
|
|
Term
| True or false, Alimony can be used to contribute to an IRA. |
|
Definition
|
|
Term
|
Definition
| Cash payments must be paid by BD not offeror, for discounts, loans, employee benefits, etc. Non cash payments not associated with sales target are allowed and not required in prospectus. |
|
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Term
| Accrued interest is paid up to and including settlement date. True or False? |
|
Definition
| False. Up to but NOT including that settlement date. Trade date plus two business days but not the settlement day (which would be the second day after trade). |
|
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Term
| What is a broad-based index option. |
|
Definition
| Covers a broad range of industries such as the S&P 500. |
|
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Term
|
Definition
Market Price / Earnings Per Share = Price to Earnings Ratio.
Trick: Meps! |
|
|
Term
|
Definition
| If the "limit" gets "low" let's go! (and buy the stock cause you think it might go back up) |
|
|
Term
| What is the maximum purchase amount of T notes and bonds for citizen investors? |
|
Definition
|
|
Term
| True or false: bond legal opinions take into account re-offering yields |
|
Definition
|
|
Term
| A vertical bull spread is long the option with the (lower or higher strike price)? |
|
Definition
| Lower. Vertical Bull buys the option with the lower strike price. |
|
|
Term
|
Definition
| Used to hedge a well diversified portfolio from market/systematic risk. |
|
|
Term
| What are exceptions to predicting performance and projections? |
|
Definition
| Mostly prohibited - get that in your head. But two are reports produced by an investment analysis tool and research reports that might include price targets in certain circumstances. |
|
|
Term
| What is gross settlement? |
|
Definition
| Just what happens between the strike price and index value at the close. Ignore premiums. |
|
|
Term
| What does earnings per share measure? |
|
Definition
| Total Earnings / Outstanding Shares |
|
|
Term
| If you bought a put, how is it taxed if exercised? |
|
Definition
Exercise price minus premium paid = sales proceeds of the stock sold.
Exercise price - premium = sales proceeds |
|
|
Term
|
Definition
| Broadest index. Measures the dollar value of all shares of more than top 5,000 public traded US stocks. (actually up to 7,000 stocks). Capitalization weighted. |
|
|
Term
| Explain support v. resistance. |
|
Definition
| Resistance is highest price, support is lowest price -- historically. Short term traders use these levels to decide how to trade within those levels. A buy stop would be used if an investor suspects a break will occur in the resistance level is coming. |
|
|
Term
| How do you determine breakeven on debit spreads? |
|
Definition
| Breakeven on debit spreads is determined from the long position. |
|
|
Term
| Short straddles are profitable when? |
|
Definition
| When they are inside the break events. |
|
|
Term
| What does the markup policy mean? |
|
Definition
| Applies to OTC and is based on availability, price, transaction amount, plus services of the firm. Low value securities or low dollar amounts can be marked up. |
|
|
Term
|
Definition
| Short term - always capital gains, never ordinary income because they are less than 12 months. |
|
|
Term
| What options strategy is best if an investor wants to maintain a long position in the market while getting max protection from downside? |
|
Definition
| Buying Puts. Buy a put because you are protected to zero. |
|
|
Term
| What is the max contribution per year for a Coverdell? |
|
Definition
| Coverdell deposits can not be more than 2k in any one year and are not tax deductible but withdrawals are tax free. |
|
|
Term
| When determining if a contract is in the money, what do you NOT consider? |
|
Definition
| The premium. Investors are never in or out of the money. You never consider the premiums or whether it is long or short. Long or short doesn't matter - just if a put or call. |
|
|
Term
| Random walk theory says what? |
|
Definition
| It is futile to try to outperform the market. Past performance can't predict anything because the market reacts perfectly to new information. |
|
|
Term
| Explain the exercise style of OEX, SPX, and S&P 100 LEAPS. |
|
Definition
| OEX and S&P 100 are American style; SPX (S&P 500) are European style. |
|
|
Term
| Calculate preemptive rights offering |
|
Definition
| Outstanding shares/number of new shares = ratio. Then, shares you own divided by ratio = what you can subscribe to. |
|
|
Term
| How long does the FINRA communication requirement last after a rep has joined a new firm? |
|
Definition
|
|
Term
| When do VIX options expire? |
|
Definition
| Expire on the Wednesday that is 30 days prior to the third Friday of the calendar month immediately following the expiring month. THEREFORE, THE LAST DAY A CUSTOMER COULD CLOSE WOULD BE THE TUESDAY BEFORE EXPIRATION OF THE CONTRACT. They expire EUROPEAN style and are based on a February cycle. |
|
|
Term
| What happens if a customer does not respond to the request for verification of background information? |
|
Definition
| The firm can consider that it is verified. |
|
|
Term
| What is the calculation to find 5 mills of $100,000,000? |
|
Definition
| $100,000,000 x 5 mills (0.005) = $500,000 - Remember the holy trinity - three zeros 0.00# |
|
|
Term
| What are portfolio margin accounts? |
|
Definition
| Use quantitative models - for high net worth individuals. |
|
|
Term
| What are the differences between fundamental and technical analysis? |
|
Definition
Fundamental deals with company-specific information like management, earnings, company outlook, P/E ratio.
Technical analysis deals with trading volume, odd lots, timing, support and resistance levels. |
|
|
Term
| Explain the difference between OEX and SPX? |
|
Definition
| OEX is the 100; SPX is the 500. |
|
|
Term
| Why does investing in small caps require due diligence? |
|
Definition
| There is lots of liquidity risk. |
|
|
Term
| When do Equity LEAPs settle? |
|
Definition
| Equity leaps settle on the second business day following exercise date |
|
|
Term
| How many calendar days do you have to exchange discovery documents with counter party? |
|
Definition
| You have 20 calendar days. |
|
|
Term
| What are corporate bonds quoted in? |
|
Definition
| 1/8ths example 100 1/2. Government securities use decimals or 32nds. |
|
|
Term
| What does an investor who is in a long straddle expect from the market? |
|
Definition
|
|
Term
| What is the maximum food rule? |
|
Definition
| One hundred thirty dollars |
|
|
Term
| True or false, REITS are investment companies under the investment company act of 1940. |
|
Definition
|
|
Term
| What are examples of non cash payments? |
|
Definition
| Non cash includes gifts up to $100 per year; merchandise and prizes; travel for meetings and lodging and occasional meals (but not for spouses). They will possibly ask so know A commission is classified as a cash payment and is not included on the list of non-cash payments. |
|
|
Term
| What is a qualified v. unqualified opinion and which is better? |
|
Definition
| Unqualified better. Qualified means there is a problem. |
|
|
Term
| If you wrote/sold a put, how are you taxed? |
|
Definition
| Exercise price of put - premium received = cost basis of stock purchased. |
|
|
Term
| What does market momentum measure? |
|
Definition
| Measures rates of acceleration and takes into account price and volume trends. |
|
|
Term
| What is the average payout ratio for a growth stock? |
|
Definition
|
|
Term
| What happens to Coverdell earnings not used for education? |
|
Definition
| Earnings not used for education are subject to ordinary income tax plus a 10% penalty. |
|
|
Term
|
Definition
| Company specific reactions. |
|
|
Term
| Trick to remember the conversion ratio formula? |
|
Definition
| "Parc" the car. "Par" value divided by "C" for "Conversion price (Par Value/conversion price = Conversion ratio) |
|
|
Term
| Written complaints must be reported to FINRA in how many days? |
|
Definition
| 30 Days. They think this is prompt. |
|
|
Term
| If an employee is trading in their own account, according to MSRB you have to do what? |
|
Definition
| Notify and provide routine confirmations but do not need prior approval. |
|
|
Term
|
Definition
| When you buy the option with the lower strike price |
|
|
Term
| What is pumping and dumping? |
|
Definition
| Spreading false news or fictious trading activity to inflate stock price. |
|
|
Term
| US Treasury notes pay interest when? |
|
Definition
|
|
Term
| When an option is "at the money" what is the time value? |
|
Definition
| The time value is the value of the premium - that's it. |
|
|
Term
|
Definition
|
|
Term
| What is the treasury security that preserves the investor's capital the most? |
|
Definition
| TIPS because of indexing. |
|
|
Term
| net transactions means… |
|
Definition
| Mark up or Mark Down will be included in the transaction price |
|
|
Term
|
Definition
| Options ads have to be approved by a registered options principal; |
|
|
Term
| Foreign entities withhold tax on what? |
|
Definition
| Dividends and interest, NOT cap gains dist. |
|
|
Term
|
Definition
| The amount of PREMIUM which exceeds the value. |
|
|
Term
|
Definition
| A sell and a buy on different exchanges. (not buy buy not sell sell) |
|
|
Term
| How do you determine how much an index option costs? |
|
Definition
| Premium quote x the index multiplier - just like regular options. |
|
|
Term
|
Definition
| M is the roman numeral for 1000 |
|
|
Term
| Whenever you buy a put, what are you doing? |
|
Definition
| Hedging long stock positions. |
|
|
Term
| What kind of options can you buy in a margin account? |
|
Definition
You can buy calls and puts; however, 100% of premiums are required. So you can buy them but just not on margin (unless it is a LEAP with more than 9 months).
You can write covered calls and puts in a margin account but you can only do spread positions and you can only write uncovered calls and puts with a margin deposit |
|
|
Term
| What are rules for option communications re: marketing. |
|
Definition
| Must be limited to general descriptions; must not contain recommendations or projected or past performance or name a specific security. Must contain contact info to obtain the ODD. |
|
|
Term
| What makes up shareholders equity? |
|
Definition
| Preferred stock, common stock, retained earnings, paid in surplus or capital |
|
|
Term
| General partners have limited or unlimited liability? |
|
Definition
|
|
Term
| Which ads require principal approval? |
|
Definition
| Websites; bio on BD website; blogs with static content. Exception might be personal website (like a match.com profile). |
|
|
Term
|
Definition
| 30 selected common stocks divided by a constant. It is not cap weighted but price weighted. Very narrow sample of stocks. Indication of market direction. |
|
|
Term
| When does the maximum loss occur in a long straddle? |
|
Definition
| Note: Because the investor in a long straddle expects volatility, the maximum loss would occur if the stock price was exactly the same as the strike price (at the money) because neither contract would have any intrinsic value |
|
|
Term
| List exceptions to FINRA filing rules? |
|
Definition
| Correspondence*; institutional communications*; Advertisements previously approved and re-used; statistical updates to pre-existing templates previously filed; ads and literature solely related to recruitment or HR; ads that simply identify the firm's trading symbol; tombstone ads; press releases only available to media; prospectuses, prelim prospectuses; or offering circulars because they are disclosure docs; issuer created free writing prospectuses; independently prepared reprints of arciels or reports (but if you send it to more than 25 you got to have it approved); communications that only list products and services; announcement that a member has participated in a private placement; retail comms that don't make ANY recommendation or promote a product or service; posting on electronic boards; research reports concerning only exchange-listed securities including exchange listed closed-end funds or master limited partnerships. |
|
|
Term
| What is the statute of limitations on claims? |
|
Definition
|
|
Term
| What is an "agency cross" |
|
Definition
| When a broker dealer acts as a market maker represents the buyer and the seller in the same transaction. This is ok and common in OTC. |
|
|
Term
| How long do you have to keep complaints (MSRB)? |
|
Definition
| Six years. REMBMER - different than FINRA which is four. |
|
|
Term
| What is capitalization weighted versus price weighted? |
|
Definition
| While a cap-weighted index derives its performance from the movement of the underlying holdings multiplied by their respective allocations as determined by market cap, the Dow Jones Industrial Average is a price-weighted index, which simply means that stocks with the highest share price receive the greatest weighting |
|
|
Term
|
Definition
| Newly issue t bill prices are lowered until a responsive bid is reached. |
|
|
Term
| Why would someone buy OEX LEAPS Puts? |
|
Definition
| They would provide a hedge for a large portfolio of large cap equity securities. |
|
|
Term
| When a spread is done net credit, what is the goal of the investor? |
|
Definition
| The investor wants them to expire to keep the premium - the net credit. |
|
|
Term
| A customer purchases $20,000 XYZ Corporation 8% bonds for $18,700 and pays $350 and accrued interest what is the customers cost basis for the bonds? |
|
Definition
| The cost basis is $18,700 - accrued interest does not effect cost basis. |
|
|
Term
| What is the maximum loss in a debit spread? |
|
Definition
| The maximum loss in a debit spread is the net debit in the premiums if they expire; the max profit is the difference between strike prices minus the net debit. You want debit spreads to widen by more than the net debit to be profitable. |
|
|
Term
| What is the minimum background to obtain from a customer? |
|
Definition
| Investment objectives; employment status; estimated annual income from all sources; estimated net worth; estimated liquid net worth; marital status; dependents; age; experience and knowledge; ability to evaluate the risks (pretty much EVERYTHING!!!!!) |
|
|
Term
| What is refunding of a bond? |
|
Definition
| Basically a refinancing of a bond. They retire it by refunding it because there has been a sharp decline in interest rates and they can do new issues at lower rates. |
|
|
Term
| What is the max contribution per year for a Coverdell? |
|
Definition
| Coverdell deposits can not be more than 2k in any one year and are not tax deductible. |
|
|
Term
| What is the expiration day for world currency options? |
|
Definition
| Third Friday of the expiration month. |
|
|
Term
|
Definition
| Alpha measures the amount that the investment has returned in comparison to the market index or other broad benchmark that it is compared against. |
|
|
Term
| What does the odd lot theory in technical analysis say? |
|
Definition
| Odd lot is always wrong. Buy when odd lotters are selling, sell when odd lotters are buying. Do the opposite of what they do. (odd lots are less than 100 shares.) |
|
|
Term
| Explain what is taxed in a Coverdell? |
|
Definition
| Contributions are not tax free, but withdrawals are. |
|
|
Term
|
Definition
| I will tell you to sell just below the high. A stock is on its way back up. You expect it to get to 15 tops. It's at 10 today. Set your sell limit at 13. |
|
|
Term
| How do you calculate earnings per share? |
|
Definition
| Net Earnings/common shares outstanding = EPS. Trick. Use your fishing net and divide it by the fish you have to catch because they are still outstanding |
|
|
Term
| What is efficient market hypothesis? (aka EMH) |
|
Definition
| It's impossible to beat the market because the current prices reflect all relevant info; Stocks always trade at their current fair value (this is bullshit look at Tesla). This theory thinks technical or fundamental analysis will not earn better than average rates of return. |
|
|
Term
| What is marking the close? |
|
Definition
| Placing a buy order at the end of the trading day at a price higher than prevailing market price. |
|
|
Term
| State the order in which actions must be taken when opening a new options account. |
|
Definition
Proper sequence:
I. obtain essential facts from customer;
II. Get approval of the securities sales supervisor or branch office manager;
III. Enter customer's order;
IV. Obtain a signed options account agreement. |
|
|
Term
| What is Coverdell best suited for -- what type of investor? |
|
Definition
| Best for low and middle income. |
|
|
Term
| What is the prior use filing rule? |
|
Definition
| File with FINRA at least 10 business days prior to first use. Must include anticipated date of first use and date approval given. |
|
|
Term
| What are statutory disqualifying events? |
|
Definition
| Making false statements in a U4; all felony convictions for 10 years; broad range of unlawful investment activities; expulsions from SROs; DUIs must be disclosed on an original filing |
|
|
Term
| Why is original issue discount better compared to a bond purchased in secondary market? |
|
Definition
| Because OIDs treat income as interest income and exempt from federal tax. If bought in secondary, the discount is treated as ordinary income and taxable (not cap gains). |
|
|
Term
| How long does a BD have to keep a written option complaint? |
|
Definition
| Four years (used to be three so be careful if an old test question shows up) |
|
|
Term
|
Definition
| 500 highly capitalized from all sectors, including utilities, transportation, and financials, considered to be the measure of average market performance. Capitalization weighted. |
|
|
Term
| What is the trick to remember order flow? |
|
Definition
| Radio WPMC - Wire Room; Purchase and sales; Margin dept; Cashier's dept. |
|
|
Term
| If interest ways paid March 15, how many days of interest for march will you need to count? |
|
Definition
| Remember to count from the day interest was paid because it wasn’t included in that payment. So it would be 17 days because it is March 15 to 31. |
|
|
Term
| Who hires bond counsel and what does counsel determine? |
|
Definition
| Counsel determines if qualifies for tax exempt status and reviews issues to make sure it meets standard to issue. The issuer hires, NOT the managing underwriter or syndicate. |
|
|
Term
| How much per year can you contribute to a Coverdell? |
|
Definition
| No more than $2,000 per year, no matter how many accounts. |
|
|
Term
|
Definition
| It is a basket of foreign currencies that measure the value of the US Dollar against them. |
|
|
Term
|
Definition
| The amount of PREMIUM which exceeds the value. The more the option is in the money, the higher the premium will be. |
|
|
Term
| What is an option's intrinsic value? |
|
Definition
The number of points it is in the money.
Formula: Strike price - Intrinsic value = Time Value |
|
|
Term
| When do index options settle? |
|
Definition
| Next business day following exercise date. |
|
|
Term
|
Definition
| 1675 stocks from the NYSE, AMEX, NASDAQ, and OTC and is equally weighted average. Capitalization weighted. |
|
|
Term
| Explain how to adjust for stock dividends in an option. |
|
Definition
| Value of stock before dividend / # new shares generated = new strike price. |
|
|
Term
| In a trust account, what must you examine before exercising options? |
|
Definition
| The trust agreement to make sure the trustees are empowered to trade options in the trust account. |
|
|
Term
| Accrued interest on corporate and Muni bonds is calculated on what calendar? |
|
Definition
|
|
Term
| What are "signatures of convenience" and are they ever allowed? |
|
Definition
| No. Can't have clients sign blank forms or sign for them. |
|
|
Term
| When is a short put in the money? |
|
Definition
| When the market price of the stock is LESS THAN the exercise price. |
|
|
Term
|
Definition
| Prices changes of ALL listed common stocks, with industrials being largest. Capitalization weighted. |
|
|
Term
| What should you ignore when determining intrinsic values of options? |
|
Definition
| Whether they are long or short, and ignore the premiums too. And the investor. The investor is not in the money -- the contract is. Fight the urge to think about short/long investor. Focus on contract. |
|
|
Term
| What can you use money for in a Coverdell? |
|
Definition
| Higher and qualified elementary and secondary. |
|
|
Term
| Other social media rules. |
|
Definition
| Prior principal approval not required for interactive forums, but must supervise. A principal must approve any site if they intend to use for business purposes. |
|
|
Term
|
Definition
| 65 common stocks from industrial, transportation and utilities. Capitalization weighted. |
|
|
Term
| What does a spread look like? |
|
Definition
| spread = BS (buy a call, sell a call) |
|
|
Term
| Can a Sec 404c include a defined benefit plan? |
|
Definition
| No, not allowed. A defined benefit plan is not self directed and doesn't qualify for safe harbor provisions. |
|
|
Term
| A convertible preferred is selling for $120 per share with a conversion price of $20. What is the parity price of the stock? |
|
Definition
|
|
Term
| What is the value of a treasury bond quoted at 99.24? |
|
Definition
| Answer: 24/32 = 75 so 99.75 x 10 = 997.50. |
|
|
Term
| When are payments to publications that influence stock prices ok? |
|
Definition
| Advertising; if disclosure clearly given; research reports |
|
|
Term
| When is pre-approval of sales literature and worksheets not required? |
|
Definition
| Usually an ROP must approve, but if being sent to institutional clients, no pre-approval is required. |
|
|
Term
| If a US investor must make payment in a foreign currency, what would the investor buy? |
|
Definition
| Calls on the foreign currency in case the value of the foreign currency goes up. |
|
|
Term
|
Definition
| Customizable options offered on CBOE - you can customize exercises price, styles, dates. |
|
|
Term
| What are EMH stipulations - there are three of them: |
|
Definition
| 1. Weak version: market prices reflect past prices and volume; Semi-strong: public available info reflected in prices; 3. Strong: all info public or private is reflected in market prices. |
|
|
Term
| Explain "concurrent with finra first use" examples. |
|
Definition
| Concurrent means you submit for approval within 10 days of first use (not before. Items that meet this requirement include: retail comms that promote registered investment companies like closed end funds, UITs, annuities; Generic investment companies do not have to be filed. Retail comms concerning public direct participation programs; registered CMOs; structured products or other registered derivative products; any final filmed version of a prior filmed "story board" unless it's general and educational retail comms that contain bond or mutual fund volatility ratings. Advertising concerning government securities does not require filing. |
|
|
Term
| What do markups not apply to? |
|
Definition
| Government securities, Reg A, anything with a prospectus |
|
|
Term
| what can Coverdell be used for? |
|
Definition
| Benefits can be used to pay qualified higher ed and qualified elementary and secondary education benefits. |
|
|
Term
| How do you determine the contract value of an index option? |
|
Definition
| Multiply $100 (not shares like we do with regular options). |
|
|
Term
| If an unauthorized trade benefits a client, is it acceptable? |
|
Definition
| Unauthorized trading, even if benefits the client, is still against rules. |
|
|
Term
| What are government securities quoted in? |
|
Definition
| Government securities are quoted in decimal points. Quotes are in 32nds. Example : 103.08 = 103 8/32 = 1,032.50. |
|
|
Term
| What is the formula for current yield on a bond? |
|
Definition
| AI/M - as in Ready AIM Fire. Annual Interest Rate (value) / Market Price |
|
|
Term
| Define correspondence and what are the rules? |
|
Definition
| Different than retail communication. Any written communication to 25 or fewer retail investors within a 30 day period. DOES NOT need principal approval so long as no investment recommendation or promotion is made. Includes both Prospective and Existing clients. |
|
|
Term
| When does exercise on a VIX option occur? |
|
Definition
| Automatic exercise occurs if exercise settlement value is equal to or exceeds strike price on the call. |
|
|
Term
| What premiums do you use to determine break evens in straddles? |
|
Definition
| You use the total of BOTH premiums. |
|
|
Term
| Show the order of approving an options agreement. |
|
Definition
| Obtain facts; provide ODD BEFORE the account is approved for options trading; get the account approved by a SSS or ROP. If approved by a SSS first, an ROP must approve within 10 biz days. Then the agreement must be received in 15 calendar days. Then within 15 days of the account being approved for options trading, you must send the client the background to verify. |
|
|
Term
|
Definition
| Up to 3+ years (39 months) on the third Friday of the Expiration Month. |
|
|
Term
| What is retained earnings |
|
Definition
| Net income - Dividends paid |
|
|
Term
| What is the settlement day for an option that is bought or sold? |
|
Definition
| Next business day following the trade date. |
|
|
Term
| What are the three things you must look at if a client is demanding a Muni that is not suitable? |
|
Definition
| Maturity date, rating, and tax bracket of client. You can't fill if not appropriate (but if a corporate or gov bond you could). |
|
|
Term
| What is the advance decline theory concerned with? |
|
Definition
| Concerned with number of stocks that advance in relation to those that decline. Good measure of a bull or bear market. |
|
|
Term
| How do you calculate the premium value on a world currency option. |
|
Definition
| 1 point equals $100. Same as all other options. |
|
|
Term
| If a US investor must accept payment in a foreign currency, the investor would buy? |
|
Definition
| Puts on the foreign currency. And remember, you can't hedge US dollars. |
|
|
Term
| Current liabilities must be paid when? |
|
Definition
| in the upcoming 12 months. |
|
|
Term
| How do you calculate retained earnings? |
|
Definition
| Net earnings MINUS dividends = retained earnings. Take that fishing net you caught all your fish. Now you have to sell some of them to your shareholders. What you have left is your retained earnings. |
|
|
Term
| What happens to yields when interest rates decline? What happens to bond prices? |
|
Definition
| When interest rates decline, Yields decline and bond prices go up. Yield to maturity and current yield follow interest rates. |
|
|
Term
| How do you calculate the break even on a debit put spread? |
|
Definition
| Long Exercise price - net debit of premiums |
|
|
Term
| What is the penalty for earnings in a Coverdell not being used for higher ed? |
|
Definition
| Ordinary income tax plus a 10% penalty. |
|
|
Term
| Describe a speculative capital structure. |
|
Definition
| Highly leveraged because lots of bonds. Speculative capital structure because those bondholders will need to be paid back. |
|
|
Term
| What is the conversion ratio formula for bonds? |
|
Definition
| Par Value / conversion price. For example, one bond that can be converted to 20 shares of common stock has a 20-to-1 conversion ratio. The conversion ratio can also be found by taking the bond's par value, which is generally $1,000, and dividing it by the share price. A stock trading for $40 has a conversion ratio equal to $1,000 divided by $40, or 25. |
|
|
Term
| Total liabilities plus total shareholder equity gives you what? |
|
Definition
| All of the liabilities and outstanding equity of the company. |
|
|
Term
| What is the age cutoff for Coverdell and what is the exception? |
|
Definition
| 18 unless special needs. Must be distributed by age 30 or 10% penalty unless transferred to another family member. |
|
|
Term
| When is a long call in the money? |
|
Definition
| When the stock is trading above the strike price, it's in the money. |
|
|
Term
| What type of order does a market maker record in the book? |
|
Definition
| Limit orders because market orders to sell and buy happen immediately and don't need to be in the book. |
|
|
Term
| How do interest rate or yield options settle and when? |
|
Definition
| In cash and European style, at expiration only - the third Friday of the expiration month. |
|
|
Term
| What is total liabilities? |
|
Definition
| current liabilities and long term debt = total liabilities. |
|
|
Term
| What are the contract values of equity leaps? |
|
Definition
| Equity leaps represent 100 share of the underlying stock. |
|
|
Term
| A convertible bond is quoted @80 and has a conversion price of $50. What is the parity price of the stock? |
|
Definition
Step 1. Par Value / conversion price = Conversion ratio = 20 shares
Step 2. Market price / number of shares = 40 per share
For example, one bond that can be converted to 20 shares of common stock has a 20-to-1 conversion ratio. The conversion ratio can also be found by taking the bond's par value, which is generally $1,000, and dividing it by the conversion price. |
|
|
Term
| When is a long put in the money? |
|
Definition
| When the market price of the stock is LESS THAN the exercise price. |
|
|
Term
| What is this equation: y = a + bx + u |
|
Definition
y is the performance of the stock or fund.
a is alpha, which is the excess return of the stock or fund.
b is beta, which is volatility relative to the benchmark.
x is the performance of the benchmark, which is often the S&P 500 index.
u is the residual, which is the unexplained random portion of performance in a given year. |
|
|
Term
| What are characteristics of a DVP account? |
|
Definition
| For institutional transactions - delivery only occurs when cash payment is actually received (also known as delivery against cash) |
|
|
Term
| What is the margin requirement for writing uncovered equity options? |
|
Definition
| 20% of the market value of the stock plus the premium for the option. |
|
|
Term
| Why do you deduct dividends from net income? |
|
Definition
| From Net income we deduct dividends on preferred stock and it is after tax deduction because it's voluntary -- a want to. Then we get Net Earnings!! |
|
|
Term
| How do you calculate the break even on a debit call spread? |
|
Definition
| Long Exercise price + net debit of premiums |
|
|
Term
| If a customer asks for a copy of the arbitration agreement, how long do you have to provide? |
|
Definition
| Within 10 days of the request. |
|
|
Term
| True of false - the financial condition of other limited partners should be considered when investing. |
|
Definition
|
|
Term
| What is the general dividend payout ratio of a public utility company? |
|
Definition
|
|
Term
| What are the contract values of index leaps? |
|
Definition
| Index leaps represent $100 times the value of the underlying index settled in cash. |
|
|
Term
|
Definition
| A Reg A+ offering covers exempt securities - less that $75 million in any 12 month period. It is a short registration statement and issuer sends a circular to the public instead of a normal prospectus. |
|
|
Term
| Puts are in the money when? |
|
Definition
| The market price is trading BELOW the strike price. |
|
|
Term
| What does a corporation do when it wants to open a margin account? |
|
Definition
| Whenever a corporation opens an account with a broker-dealer, a resolution by the board of directors, appointing specific individuals who have trading authority must accompany the application. In addition, if the company wishes to open a margin account, the company must also provide a copy of its charter or by-laws as evidence that the company is legally permitted to trade on margin. |
|
|
Term
| What are the three Ps for in auction procedures on the NYSE? |
|
Definition
| Priority(larger, market orders first in front of limits, orders same sized), precedence and parity - but NOT premiums. |
|
|
Term
| If an option agreement is not returned in 15 days, what kind of transactions can occur? |
|
Definition
| Only liquidating transactions. Remember, the answer is not to halt transactions (trick) -- only liquidating transactions to close out. |
|
|
Term
|
Definition
|
|
Term
| How many panelists if over 100k in arbitration claims? |
|
Definition
| If a claim is more than 100k or non-monetary the panel will consist of three panelist unless parties agree to less. |
|
|
Term
| What are characteristics of passive investment management style? |
|
Definition
| Replicating holdings of an index; buying and holding (not actively training); low management fees. |
|
|
Term
| What is the age cutoff for Coverdell and what is the exception? |
|
Definition
| 18 unless special needs. Must be distributed by age 30 or 10% penalty / |
|
|
Term
| What are interdealer quotes and how to they relate to pink sheets? |
|
Definition
| The securities listed on the OTCBB include domestic and foreign companies, as well as American depository receipts (ADRs). The OTCBB, and other OTC exchanges, are sometimes referred to as "pink sheets." |
|
|
Term
| What is the best way to structure a Coverdell to avoid impacts to financial aid? |
|
Definition
| Best if the parent owns it. If the account is owned by the student, it has a high impact on financial aid eligibility. |
|
|
Term
| What is churning an account? |
|
Definition
| It is excessive trading that clearly is taking place too often. The quality of the securities is not considered and is irrelevant. |
|
|
Term
| What are the rules regarding correspondence? |
|
Definition
| Does not need to be approved by an ROP unless it is sent to more than 25 retail clients within a 30 day period and the correspondence makes an investment recommendation or promotes the services of the firm. |
|
|
Term
| What painting the tape or wash sales? |
|
Definition
| selling and buying back stock multiple times to draw interest into the market, which can push up the price. |
|
|
Term
| Soft dollar fees include research, computer software, and other services in lieu of commissions, but what is not allowed in soft dollar arrangements? |
|
Definition
| Computer hardware, telephone lines, rent, meals or travel reimbursement, and overhead types. |
|
|
Term
| What is the Forex Market? |
|
Definition
| Decentralized currency market. Facilitates international trade and is a market for US and Foreign currencies. Helps increase liquidity. The Spot price of each currency is used to determine the value. Opens Sunday 5 p.m. EST closes Friday 5 p.m. EST. |
|
|
Term
| If you list a stock you recommended in an ad or communication, what must you do? |
|
Definition
| You must list ALL recommendations you made within the past year, including the losers. |
|
|
Term
| How do you calculate your break even on a call debit spread and a put debit spread? |
|
Definition
Always calculate your break even from the buying/long position. Call up, put down.
Call= Long exercise price + the net debit of premiums.
Put = Long exercise price - the net debit of the premiums |
|
|
Term
| If institutions are moving portfolios into cash, what kind of outlook is this? |
|
Definition
|
|
Term
| When might an institutional communication be considered retail? |
|
Definition
| If an institutional communication may be redistributed to retail investors even though initially sent to institutional investors. |
|
|
Term
| The income statement or P&L shows what? |
|
Definition
| Revenues, Expenses, and earnings |
|
|
Term
| Can Arbitrators send you to prison? |
|
Definition
| Arbitration does not allow prison sentences |
|
|
Term
| What is "systematic risk" |
|
Definition
| Systematic risk refers to the risk inherent to the entire market or market segment. Systematic risk, also known as “undiversifiable risk,†“volatility†or “market risk,†affects the overall market, not just a particular stock or industry. |
|
|
Term
| What is cash settlement for index options. |
|
Definition
An investor is long 1 SPX Aug 600 Put @7 when the index is at 650. The index closes at 550 and he exercises his option. What is the Cash Settlement of these transactions?
Premiums | Stock/Index
B-500 S +600
B - 550 (gets to buy at market, then "put it" to the buyer at the strike price)
So 50 x 100 = $5,000 cash settlement |
|
|
Term
| What does 1 point on the VIX equal. |
|
Definition
|
|
Term
|
Definition
| Stop and sell if the damn price fell (order placed below current market price). |
|
|
Term
| When do Index LEAPS settle. |
|
Definition
| Index leaps will settle in cash the next business day following exercise date. |
|
|
Term
| What's a straddle and why is it used? Explain both Long and Short? |
|
Definition
| Buy a Call, Buy a put; or, sell a call, sell a put. All same strikes and dates. Long Used when you expect a Big move that could go either way as the result of a big news event or activity; the short straddle seller thinks the price won't be that much effected and won't move much. |
|
|
Term
| True or false - pink sheet quotes are firm. |
|
Definition
| The Pink Sheets are for interdealer use only - not for the public. Pink Sheet quotes are always subject, not firm. |
|
|
Term
| Political contributions cannot exceed $250 per what? |
|
Definition
|
|
Term
| How long must you keep ads, correspondence, confirmations and sales literature? |
|
Definition
|
|
Term
| What is the settlement day for an exercise of an option? |
|
Definition
| Two business days from the time the OCC receives the exercise notice. |
|
|
Term
| What are the expiration months for world currency. |
|
Definition
|
|
Term
|
Definition
| For government securities and options, the settlement date is usually the next business day, that is, T+1. |
|
|
Term
|
Definition
| July, October, January -- JOJ |
|
|
Term
| What are exceptions to pre-approval of retail communications? |
|
Definition
| If a communication is approved for use by another member and you don't change it; if it is a research report (unless it makes a recommendation); if it is posed on an online blog or forum; if it does not make recommendations or promote products of the firm; FINRA makes exemptions on a case by case. |
|
|
Term
| What is the suitability standard for a DPP investor? |
|
Definition
| At least $1M net worth; long term intention of investor; tax bracket; risk tolerance; probably should be an accredited investor |
|
|
Term
|
Definition
| Beta measures volatility against a benchmark like S&P. IMPORTANT it represents Systematic Risk |
|
|
Term
|
Definition
| The SS is indicates lots of 10 for preferred stock. So four lots (40) shares of FTR preferred were sold at 75. |
|
|
Term
| In a margin account, how much can the bank borrow in re-hypothecation? |
|
Definition
|
|
Term
| What is a healthy liability to assets ratio. |
|
Definition
| $2 in asset for every $1 in liabilities. |
|
|
Term
| Give a summary of the finra 10 disclosure reporting events and when do they have to be reported? |
|
Definition
| Must report in 30 days. 1. violated securities laws; subject of customer complaint involving theft; is denied registration; is indicted or convicted of any felony or any misdem. Related to securities; is a respondent in an SRO proceeding; is a partner of a firm that was suspended expelled or had its registration revoked; is a defendant in any securities or commodities related civil litigation or arbitration with an award succeeding 15k (or if firm, exceeding 25k); is associated with any business who is subject to a statutory disqualification; is the subject of disciplinary action involving the withholding of commission or imposition of fines in excess of 2,500 |
|
|
Term
| How long do members need to retain records of social media communications that are related to the BD business? |
|
Definition
|
|
Term
| If you are short 100 shares and a 10% dividend is announced, on Ex date what happens? |
|
Definition
|
|
Term
| What is a retail communication? |
|
Definition
| ANY written communication to more than 25 retail investors within a 30 day period. Registered principal approval is required . |
|
|
Term
| What is a private placement |
|
Definition
|
|
Term
| Why are T Bills considered risk free? |
|
Definition
| Because short term and guaranteed by the federal government. |
|
|
Term
| True or false. An investor has limited loss potential if he sells put options against stock that he has sold short. |
|
Definition
| The investor has some protection because he has received premiums but still has unlimited loss potential on the stock position. |
|
|
Term
| True or false - advertising sales literature has to be approved by MSRB prior to use. |
|
Definition
| False. Requires only principal approval. |
|
|
Term
| What is the average payout ratio for a blue chip? |
|
Definition
|
|
Term
|
Definition
| ATM exposure, lack of liquidity, loss of investment, assessment of additional funds, IRS scrutiny, limited partners having no control of general partner management style |
|
|
Term
| What is interpositioning? |
|
Definition
| interpositioning is placing a second broker between a customer and market maker to generate more commissions. |
|
|
Term
| What are ad-valorem taxes and who charges them? |
|
Definition
| Property taxes and local governments (not states). |
|
|
Term
| What does a customer buy at (bid or ask) |
|
Definition
| A customer buys at the ask and sells at the bid. |
|
|
Term
| What is marking the open. |
|
Definition
| Manipulative pricing at the start to influence opening price of a stock. |
|
|
Term
| What does the MSRB regulate? |
|
Definition
| Broker dealers, not issuers. An SRO that oversees the Muni market. Rules enforced by SEC and FINRA. |
|
|
Term
| What is the loss potential on a short straddle? |
|
Definition
| Short straddles or short combos always have unlimited loss potential. |
|
|
Term
| What do indexed options settle in? |
|
Definition
|
|
Term
| What CAN'T you use to cover writing short positions in a Cash account? |
|
Definition
| Convertible bonds and warrants. You could in a margin account but not a cash account. |
|
|
Term
| What are suitability limits for options? |
|
Definition
| No more than 15% to 20% can be committed to purchasing options. |
|
|
Term
| What happens (tax-wise) if someone buys a Muni bond in the secondary market. |
|
Definition
| The customer who bought it will have to pay a tax every year on the prorated amount based on the discount. |
|
|
Term
| Accrued interest is added or deducted from what the seller receives? What about what the buyer pays? |
|
Definition
| Added to the amount the seller receives and added to the amount the buyer pays. |
|
|
Term
|
Definition
| Overall volatility measurement compared to overall market. A stock with a beta of 1 is moving with the market - .75 less volatile. |
|
|
Term
| A reversal of a downward move would be what type of head and shoulders formation? A bottom/inverted formation or a top formation? |
|
Definition
|
|
Term
| Cyclical stock prices do what |
|
Definition
| Rise and decline quickly in response to economic conditions. |
|
|
Term
| How do you determine strike prices of world currency options? |
|
Definition
| Take the spot price and move decimal accordingly. My trick: White countries - two decimal to right; Brown countries and Sweden: three decimals to right; Japanese Yen: Four digits to right. |
|
|
Term
| What do confirmations NOT have to show? |
|
Definition
| Trading volume or a limit price. |
|
|
Term
| What is the last day and time an option can be exercised? |
|
Definition
| 5:30 p.m. eastern on the third Friday of the expiration month. |
|
|
Term
| When does the holding period for tax purposes start on a stock that is purchased when an option is exercised (long call or short put)? |
|
Definition
| The day AFTER the option is exercised. It used to be on the day of the exercise but IRS changed to the day after. FINRA may not have caught up so keep that in mind. |
|
|
Term
| When a market is consolidating, what does it mean? |
|
Definition
| That the market is moving sideways. |
|
|
Term
| If subject to taping rule, how long do you have to install and how long do you keep the tapes? |
|
Definition
| If a firm is subject to the taping rule, it has 60 days to install taping system; maintain for 3 years from install; have readily available for the first two years, and still keep but archive in year three. They must be catalogued and dated. |
|
|
Term
| How can you tell by a symbol what an OTC stock is? |
|
Definition
| OTC stocks typically have four symbols. Like Microsoft -MSFT. |
|
|
Term
| All retail communications must: |
|
Definition
| prominently disclose BD name; reflect any relationship with the member and non members named in the communication; must reflect the products and services offered by bd. |
|
|
Term
| If you use an investment analysis tool what do you need to keep in mind? |
|
Definition
| You must give FINRA access to the tool if they ask for it. |
|
|
Term
| If you appear in an unscripted forum like a chat room or seminar, what must you do? |
|
Definition
| 1. Be fair and balanced; 2. be reasonable and disclose if there is any conflict of interest involved; must have written policies about such appearances and keep a log; they are not subject to principal pre-use approval. |
|
|
Term
| Bond interest is always a pre-tax deduction for a corporation why? |
|
Definition
| Because it must be paid and is not voluntary. They deduct it from operating profit and you are left with total income (earnings before tax). Then subtract and you're left with earnings after tax (called Net Income or EAT) |
|
|
Term
| The "spread" refers to the difference in what? |
|
Definition
| The difference between the PREMIUMS, not the strike prices. |
|
|
Term
| If a bond has declined by one point, how much value has it lost? |
|
Definition
| A 1/2 point on a stock equals =$.50; a 1/2 point on a bond =$5. So that would be $10 |
|
|
Term
| Calls are in the money when? |
|
Definition
| The market is trading ABOVE the strike price. |
|
|
Term
| When do T bills settle at auction and in secondary market? |
|
Definition
| Regular way settlement for T Bills at auction is T+3. However, in secondary market it is t+1. All gov securities settle 1 day except auction of T-bills. |
|
|
Term
| Who resolves promissory note disputes? |
|
Definition
| Promissory note disputes are resolved by FINRA appointed qualified arbitrators |
|
|
Term
| Provide an example of front-running? |
|
Definition
| Trading because you know a block trade is coming up because you have non-public info. |
|
|
Term
| Who needs to approve advertising and sales literature to prospects who have not received an ODD and what is the timing of this approval? |
|
Definition
| FINRA must approve 10 calendar days prior to first use. |
|
|
Term
| What are rules about hypothetical illustrations? |
|
Definition
| Hypothetical illustrations of mathematical principals are permitted on a fictitious company. |
|
|
Term
| What are yield-based interest rate options and how do you determine whether to buy calls or puts? |
|
Definition
| Always place your bet in the direction you think interest rates will go up. If you think interest rates are going up, buy call options. Down? Buy put options. They are used for hedging. |
|
|
Term
| What is the average price earnings ratio for the broad stock market? Tell me more about what P/E Ratios mean. |
|
Definition
| 20 to 25 times earnings (but depends on economic conditions). IF PE is really high, either the earnings will go up and reduce it, or the market price will drop to better reflect the true value of the company. It is also referred the multiple. High PE can mean higher growth potential. Low PE can mean lower growth potential or it is undervalued. |
|
|
Term
| What does a foreign company do to hedge when getting paid in dollars. |
|
Definition
| To summarize, in a foreign currency hedging question, establish the market direction you want for the foreign currency, then do the opposite to protect. Also you can't do options on the US dollar. |
|
|
Term
| Volume theory says that trading volume is bullish when? |
|
Definition
| Heavy volume trading is occurring on advances and light on declines. |
|
|
Term
| What do you have to demonstrate to conduct a transaction that may at first seem prohibited? i.e. front running. |
|
Definition
| 1. demonstrate unrelated to a block order; 2. transactions undertaken to fulfill a block order; 3. executed on a national securities exchange and comply with marketplace rules of that exchange. |
|
|
Term
| What are retained earnings and how do you calculate? |
|
Definition
| Net income - Dividends paid = Retained Earnings. An increase in retained earnings would result in an increase in shareholder's equity on the company's balance sheet. |
|
|
Term
| How many days after being approved for options must you send the financial background information to the client for verification? |
|
Definition
|
|
Term
| What does short against the box mean and how is it taxed? |
|
Definition
| When an investor is long and short the same amount of the same stock at the same time. Long 100 and short 100 of ABC. This means those two positions could close each other out. So if you are short against the box and write a call on the same stock, it's treated as naked because the long stock is already covering the short stock position. |
|
|
Term
| What are some exceptions to FINRA first use requirements. |
|
Definition
| Advertising concerning government securities do not require filing, nor do general descriptions about securities aimed at educating a reader about broad issues. |
|
|
Term
| What do long puts do? Who is obligated if exercised? |
|
Definition
| Long puts lock in a price at which stocks can be SOLD, not purchased to cover. The seller is obligated to buy from the buyer of the put at the strike price. |
|
|
Term
| How long do you need to keep repurchase agreement records? |
|
Definition
|
|
Term
| What is the CBOE Volatility Index Options (VIX)? |
|
Definition
| They work the opposite way of options and it is a barometer of near-term investor sentiment. If you think the S&P is going down, you would buy VIX Call options. Remember it's opposite of everything else. It is an option that measures market expectation of 30 day S&P index options. Option on Options on a Feeling. |
|
|
Term
| What are the periods for T Bills? |
|
Definition
| T Bills avail in 1, 2, 3, 6, 12 month - never more than 12. You may also see in weeks. |
|
|
Term
| What is an order to buy 5,000 shares all at once or not at all called? All or None or Fill or Kill? |
|
Definition
| Fill or kill. All or None orders stay active until filled. FOK orders have to happen immediately or not at all. |
|
|
Term
| When is short call in the money? |
|
Definition
| When the stock is trading above the strike price, it's in the money. |
|
|
Term
| How often do you report if subject to taping rule? |
|
Definition
| Firms subject to taping report quarterly. |
|
|
Term
| For a new Muni investor, you will need prior approval when? |
|
Definition
| Prior to the settlement of the first transaction (versus opening of the account). |
|
|
Term
| True of false - you must keep official statements for two years according to MSRB rules. |
|
Definition
| False - there is no requirement. |
|
|
Term
| A vertical bull put spread is long the option with the (lower or higher option) |
|
Definition
| Lower. Vertical Bull buys the option with the higher strike price. |
|
|
Term
| What is the margin requirement for writing uncovered equity options? |
|
Definition
| Leap options with more than nine months to expiration can be purchased on margin and it is 75% of the premium value. |
|
|
Term
| True or false. Scripted public seminars delivered to more than 20 retail investors must be approved by a principal of the firm. |
|
Definition
| If it is delivered to more than 25 that would be true. So false. If over 25, yes and a record of it must be kept. |
|
|
Term
| Do violations of firm policies have to be reported on a u4? |
|
Definition
| No - only regulatory and legal matters get reported on the U4 |
|
|
Term
| What are the basis points on a 12 month, 6 month, and 3 month T Bill? |
|
Definition
| One year is $100; 6 month or 180 day is %50; 3 month is $25. |
|
|
Term
| What is the dividend payout ratio? |
|
Definition
Measures percentage of earnings a company pays out in dividends.
Dividends per share / earnings per share = Dividend Payout Ratio
DPS = DPR
EPS |
|
|
Term
| How are limited tax bonds different from GO bonds? |
|
Definition
| Just like GO they need voter approval, but they are limited on the tax rate they will charge. |
|
|
Term
| When can the stock of a corporation be suspended from trading on NASDAQ? |
|
Definition
| Pending an announcement; if company asks; if net worth falls below a certain amount. |
|
|
Term
| What is an example of market manipulation? |
|
Definition
| Creating a misleading appearance of active trading unless it is a bona fide agency cross. |
|
|
Term
|
Definition
| Computer driven trading that does not take into account fundamental analysis. Purely technical and includes futures. |
|
|
Term
| What is the maximum gift rule? |
|
Definition
|
|
Term
| What are terms (years) fore notes and bonds? |
|
Definition
| Notes 2 - 10, never callable; 10-30, sometimes callable; TIPS adjust by CPI every six months. |
|
|
Term
| How many years do you have to keep sales literature and retail communications? |
|
Definition
| All approved sales lit and reprints must be kept for three years from last use in a file. It must have the name of the RP who approved and date; a copy of it and dates of use; and source of any chart or graph used; and if a retail comm did not require pre-use approval, the name of the person who distributed it. |
|
|
Term
| What does market sentiment describes what? |
|
Definition
| describes bullish or bearish outlook of investors. |
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Term
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Definition
| Stop and buy if it gets to high. Order placed above market price. You don't want to miss out. |
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Term
| What is the amount cap for simplified arbitration? |
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Definition
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Term
| What is the breadth of market? |
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Definition
| Describes the percentage of stocks participating in a particular move - like suddenly buying tech stocks. Advances v. declines are tracked. |
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Term
| Barbell investment strategy is what? |
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Definition
| Higher risk end hold long term bond, lower end carries short term bonds. Looks like a barbell. |
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Term
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Definition
| Permitted if all material differences are disclosed. |
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Term
| Do you want credit spreads to narrow or widen? What is the max profit potential and max max loss? |
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Definition
| We want credit spreads to narrow or expire. Max loss is the difference between the two strike prices less the net credit in the premiums. Max profit is the net credit in the premiums if the options expire. As an investor, you want net credits to expire so you can keep the premium -- as opposed to net debit, in which case you want to close the sale to make a profit - sell them. |
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Term
| When can you use testimonials? |
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Definition
| If about a technical aspect of investing, they must be qualified; if about performance, the ad must say that the person's experience may not be yours; if person is being paid for testimonial (over $100) you must disclose. |
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Term
| What is short seller theory? |
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Definition
| Because short sellers must become a buyer at some point to cover a short- a small amount of short makes for a weak market, but a large amount makes for a strong market |
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Term
| True or false: US Treasury securities are subject to inflationary risk, interest rate risk, credit risk, and market risk. |
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Definition
| Answer is false. They are not subject to credit risk because they are guaranteed by the US Government. They are subject to the rest. |
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Term
| What is a narrow based index option? |
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Definition
| Made up of nine or fewer securities. - follows a narrow range of industries. |
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Term
| Trick to remember parity price calculation? |
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Definition
| Parity - I like weird parties S&M (new shares x market price = parity price) |
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Term
| What type of bonds do ad-valorem taxes fund? |
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Definition
| General obligation, not revenue. |
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Term
| When an investor does a debit spread, what is the goal? |
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Definition
| To close out the spreads to make a profit, because if they expire he loses all the money. |
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Term
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Definition
| Retail Automatic Execution Systems that executes market and limit orders of up to 50 contracts for public customers in OEX and many equity options. |
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Term
| Explain constructive sales of appreciated stock positions. |
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Definition
| When you hedge a position trying to avoid a capital gains tax. Creates a new holding period and cost basis as if you sold your stock. |
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Term
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Definition
| Failing to pay for securities before trading and trying to use profits to pay for it. |
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Term
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Definition
| Always exercise price PLUS the Premium (whether buyer or seller) |
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Term
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Definition
| Always Exercise price Minus the Premium (whether buyer or seller) |
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Term
| Net Credit / Credit Spreads |
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Definition
| Want to expire so you can keep premium. Want premiums to Narrow. |
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Term
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Definition
| Need to close to offset or else you'll lose. You want them to WIDEN |
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Term
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Definition
| Remember just eliminate the zeros dude!!!!! |
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