Question 1
ABC stock has a position limit for its options currently set at 100,000. Which of the following portfolios violate position limits?
A.
50,000 long puts & 60,000 short calls
B.
50,000 long puts & 60,000 short puts
C.
50,000 long calls & 60,000 long puts
D.
50,000 long calls & 60,000 short calls
Question 2
A dispute arises between a firm and a customer, which they attempt to resolve by mediation. All of the following terms are associated with mediation, EXCEPT:
A.
Voluntary
B.
Binding
C.
Private
D.
Informal
Question 3
The risk and return profile for a short stock position hedged with a held call is:
I. Limited loss potential
II. Unlimited loss potential
III. Limited gain potential
IV. Unlimited gain potential
A.
II and III
B.
I and III
C.
II and IV
D.
I and IV
Question 4
A new employee of a broker-dealer is filling out FINRA Form U-4 to become a registered representative. What statement is true regarding the information placed on the form?
A.
A predispute arbitration agreement is embedded in the U-4
B.
The employee must disclose their 5 year employment history
C.
The employee must disclose their 10 year residence history
D.
Any felony or misdemeanor conviction could result in a statutory disqualification
Question 5
An investor sells 1 ABC Feb $60 put at $6.50 when the market is at $56.75. The market price rises to $69.00 on the expiration date, and stays there until the end of trading. What is the investor's gain or loss?
A.
$650 gain
B.
$650 loss
C.
$900 gain
D.
$900 loss
Question 6
In an investor's account, you find 1 long CVX May $75 call and 1 short CVX May $85 call, which was obtained through a transaction creating a net debit of $4.50. What is the maximum loss?
A.
$450
B.
$550
C.
$950
D.
Unlimited
Question 7
In an investor's account, you find 1 short CVX Mar $65 put and 1 long CVX Mar $55 put, which was obtained through a transaction creating a net credit of $4.75. Which of the following best represents the sentiment of this strategy?
A.
Premium spread to narrow / options to expire
B.
Premium spread to widen / options to exercise
C.
Premium spread to narrow / options to exercise
D.
Premium spread to widen / options to expire
Question 8
In a margin account, an investor writes a naked call with a $65 strike price and an expiration four months later. The underlying stock's market price is at $61 at the time the call is written. Assuming one contract was written, what is the investor's minimum deposit requirement?
A.
$1,500
B.
$1,800
C.
$2,600
D.
$2,900
Question 9
According to FINRA's Code of Arbitration, which of the following persons maintains the power to disqualify a person from serving as an arbitrator?
A.
The SEC Chairperson
B.
FINRA's Head of Enforcement
C.
FINRA's Chief Hearing Officer
D.
FINRA's Director of the Office of Dispute Resolution
Question 10
An investor establishes the following positions in a brokerage account:
- Short 1 DEF Jan 35 call at $13
- Long 2 DEF Jan 45 calls at $5
- Short 1 DEF Jan 55 call at $1
Assuming these positions were established when DEF's market price was at $43, what best describes the investor's market sentiment?
A.
Market rises to $45, then remains neutral
B.
Market remains between $35 and $45
C.
Market declines to $35 or below, or rises to $55 or above
D.
Market remains between $45 and $55
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