Free FINRA Series 9 practice exam
Question 1
In an account, an investor writes 1 MU Sep $70 put when MU's stock price is at $59. The customer requests your help in creating a bull put spread. Which of the following options contracts should you recommend?
A.
Long 1 MU Sep $55 put
B.
Short 1 MU Sep $55 call
C.
Short 1 MU Sep $70 call
D.
Long 1 MU Sep $85 put
Question 2
A covered put investor is concerned about their stock's market price declining below the put's strike price, forcing an assignment. What action is most likely to assuage their concerns while maintaining the covered put position?
A.
"Rolling out" the put contract
B.
"Rolling up" the put contract
C.
"Rolling down" the put contract
D.
"Rolling in" the put contract
Question 3
A dispute arises between a firm and a customer, which is presented and eventually resolved through arbitration. All of the following terms are associated with arbitration, EXCEPT:
A.
Formal
B.
Public disclosure
C.
Public hearings
D.
Binding
Question 4
Options contracts can be issued with various characteristics. All of the following index options are considered "European style," EXCEPT:
A.
Short 1 Nov DJX 250 put
B.
Short 1 Dec RUT 1290 call
C.
Long 1 Dec OEX 1330 put
D.
Long 1 Aug SPX 3220 call
Question 5
An investor does not return a signed options agreement within the required time. What is the consequence for their option account?
A.
Account must be reported to FINRA
B.
Account must be closed
C.
Trades limited to closing transactions
D.
Frozen account
Question 6
An investor goes long a call and long a put, both with different strike prices and expirations. What best describes this strategy?
A.
Long call spread
B.
Long put spread
C.
Long combination
D.
Long straddle
Question 7
A customer of a broker-dealer calls their assigned representative. After quick pleasantries, their discussion revolves around one TUV 70 put held by the investor that will expire later that day. The total premium involved in establishing the position several months ago was $300. Currently, TUV stock's market price is at $62. Assuming the customer requests to liquidate the position and the representative closes the put at intrinsic value, what is the customer's profit or loss?
A.
$500 gain
B.
$500 loss
C.
$1,100 gain
D.
$1,100 loss
Question 8
6 short Aug GS $140 calls @ $14.25 are combined with 6 long Aug GS $160 calls @ $3.75 when the market price is $150. A loss will occur at all of the following prices, EXCEPT:
A.
$150.00
B.
$150.75
C.
$152.00
D.
$155.25
Question 9
An investor holds 1 PFE Mar $75 call when PFE's market price is $82. A month later, they write 1 PFE Mar $85 call when the market price is $83. 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 10
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.
Private
B.
Voluntary
C.
Non-binding
D.
Formal
Question 11
An investor goes long 100 shares of EA stock at $85.25 and long 1 EA Sep $85 put @ $7.25. The investor will profit at all of the following stock prices, EXCEPT:
A.
$90.75
B.
$92.75
C.
$94.50
D.
$95.50
Question 12
In an investor's account, you find 1 long CVX Jul $110 put and 1 short CVX Jul $100 put. Which of the following best represents the sentiment of this strategy?
A.
Premium spread to widen / options to expire
B.
Premium spread to widen / options to exercise
C.
Premium spread to narrow / options to exercise
D.
Premium spread to narrow / options to expire
Question 13
In an account, an investor is short 1 MU Dec $70 put when the market is at $63. They want to create a short put spread. Which of the following options should you recommend?
A.
Long 1 MU Dec $50 put
B.
Long 1 MU Dec $50 call
C.
Long 1 MU Dec $90 put
D.
Long 1 MU Dec $90 call
Question 14
Which of the following documents must be provided prior to any trades being placed in a new options account?
A.
The options agreement
B.
The Options Disclosure Document (ODD)
C.
The arbitration agreement
D.
The hypothecation agreement
Question 15
An investor is short a naked call and is concerned about the impact of a rise in market price of the underlying security. To prevent this scenario from unfolding, the investor places numerous short sale trades on the underlying security to exert downward pressure on the stock's market price. What statement is true?
A.
The investor engaged in the prohibited act of frontrunning
B.
The investor engaged in the prohibited act of capping
C.
The investor's actions are not prohibited or unethical
D.
The investor engaged in the prohibited act of supporting
Question 16
Which of the following customer trades submitted to the Chicago Board Options Exchange (CBOE) by a trading permit holder is most likely to be executed by the Retail Automatic Execution System (RAES)?
A.
A market order to sell 50 EEE call contracts
B.
A limit order to buy 15 NOP call contracts at a limit of $8 when the premium is $9
C.
A stop limit order to sell 75 UVX call contracts at a stop limit price of $6 when the premium is $7
D.
A limit order to buy 75 GHI put contracts at a limit of $12 when the premium is $11
Question 17
An investor goes long May 1 VIX 80 call @ $2.50 when the VIX is currently at 78. What is the maximum loss?
A.
$250
B.
$7,550
C.
$7,750
D.
Unlimited
Question 18
Which option can be matched with a short stock position to create an income strategy?
A.
Short put
B.
Long call
C.
Long put
D.
Short call
Question 19
In a margin account, a customer writes 1 LMN Aug 170 put at $12 and holds 1 LMN Sep 170 put at $17. Both positions were executed when LMN's market price was at $169. What is the investor's initial margin requirement to establish both positions?
A.
$400
B.
$500
C.
$600
D.
$700
Question 20
In relation to options strategies, which of the following terms are synonymous with horizontal spreads?
A.
Diagonal spreads
B.
Time spreads
C.
Vertical spreads
D.
Price spreads
Question 21
A customer of your firm goes long 1 CDE Sep 60 call at $7 when the market price is $63. Several months later the market goes to $79 and the option is closed at intrinsic value. What is the tax consequence?
A.
$900 capital loss
B.
$1,100 capital loss
C.
$1,200 capital gain
D.
$1,400 capital loss
Question 22
After doing some research, you find 1 short UNH Aug $195 call @ $15.25 and 1 long UNH Aug $215 call @ $5.75, when the market price is $205. Profit or breakeven will occur at all of the following prices, EXCEPT:
A.
$200.75
B.
$203.75
C.
$204.50
D.
$205.25
Question 23
A client holds 1 long Sep $180 call in their portfolio. The market is at $176.10 at expiration. Which of the following should the investor expect to occur in their account?
A.
Expiration
B.
Automatic exercise
C.
Extension of the expiration date
D.
A position limit violation
Question 24
In general, which of the following statements is true regarding index options?
A.
American style / cash settlement at exercise
B.
American style / stock settlement at exercise
C.
European style / cash settlement at exercise
D.
European style / stock settlement at exercise
Question 25
A number of circumstances related to a common stock position can result in changing characteristics of the options contracts on the same stock. Which of the following statements related to this concept are true?
- I. Even stock splits result in a change to shares delivered at exercise
- II. Uneven stock splits result in a change to shares delivered at exercise
- III. Regular cash dividends result in a decreasing strike price
- IV. Special cash dividends result in a decreasing strike price
A.
I, II, and IV
B.
I, II, and III
C.
I and IV
D.
II and IV
Question 26
In an account, an investor is long 1 MU Oct $65 put when the market is at $70. They want to create a short put spread. Which of the following options should you recommend?
A.
Short 1 MU Nov $65 put
B.
Long 1 MU Sep $65 call
C.
Short 1 MU Sep $65 put
D.
Long 1 MU Nov $65 call
Question 27
The following positions are established by a customer in a margin account:
- Long 1 STU May 95 put at $2
- Short 1 STU May 105 put at $8
Assuming the positions are established when STU's market price is $104, what is the minimum amount the investor must deposit to execute these transactions?
A.
$300
B.
$400
C.
$500
D.
$600
Question 28
An investor is bearish on the market. Which of the following VIX options matches their market sentiment?
A.
Long VIX calls and short VIX puts
B.
Long VIX calls and long VIX puts
C.
Short VIX calls and long VIX puts
D.
Short VIX calls and short VIX puts
Question 29
6 long Sep GS $205 puts @ $15.50 are combined with 6 short Sep GS $185 puts @ $5.50 when the market price is $194. What is the breakeven?
A.
$193.50
B.
$194.50
C.
$195.00
D.
$195.75
Question 30
An individual attains a summer job for minimum wage at a broker-dealer as an intern. The individual is not involved in the sale of securities, but is granted very limited access to the firm's books & records. Their primary role at the firm is to perform analysis on the variability in the firm's trading activity. According to FINRA rules related to fingerprinting requirements of registration applicants, what statement is true?
A.
The individual is only subject to the fingerprinting process if their analysis is used to make business decisions
B.
The individual is only subject to the fingerprinting process if they can manipulate the firm's books & records
C.
Interns are exempted from the fingerprinting process
D.
The individual will be subjected to the fingerprinting process
Question 31
As per FINRA rules, a registered representative analyzes a customer's suitability profile to determine if a security on the firm's list of "approved securities" is suitable. What suitability obligation enforced by FINRA is the representative adhering to?
A.
Qualitative
B.
Reasonable-basis
C.
Quantitative
D.
Customer-specific
Question 32
An investor is deemed a pattern day trader after a number of transactions are performed in their account. Which of the following best describes the impositions on this account once the pattern day trader designation is applied?
A.
May not trade more than 4x the minimum maintenance excess
B.
May not trade more than 15x the minimum maintenance excess
C.
Minimum equity of $2,000
D.
Minimum equity of $100,000
Question 33
A member firms plans on distributing an options-related communication to an audience comprised of prospective and current customers. It is assumed at least half of the intended audience has not yet received the Options Disclosure Document (ODD). According to FINRA Rule 2220, which of the following statements on the regulations applicable to this type of communication is true?
A.
The communication may contain projected performance of options recommendations made by the firm
B.
Contact information for obtaining the ODD must be provided
C.
"Attention-getting" headlines are strictly prohibited
D.
Artful designs are discouraged
Question 34
An investor sells 3 ABC May $135 puts at $6.50. Which of the following best describes this strategy?
A.
The obligation to buy 300 shares of ABC stock at $135
B.
The obligation to sell 300 shares of ABC stock at $135
C.
The right to buy 300 shares of ABC stock at $135
D.
The right to sell 300 shares of ABC stock at $135
Question 35
Your client has a $2,355,000 portfolio of numerous large and mid-cap equities. They are concerned about market risk and ask for your guidance on how to mitigate this risk. What should you recommend?
A.
Buy index puts
B.
Rebalance the portfolio for added diversification
C.
Sell index calls
D.
Increase the aggressiveness of the portfolio to outperform the market
Question 36
An investor currently holds 200,000 long ZZZ puts, which has a position limit of 400,000. The investor wants to add additional options to their portfolio. A transaction in which of the following would exceed position limits?
A.
180,000 short calls
B.
180,000 short puts
C.
220,000 short calls
D.
220,000 short puts
Question 37
An investor holds 1 MSFT Jul $140 call and 1 MSFT Jul $145 put. What strategy is established by the investor?
A.
Long spread
B.
Long combination
C.
Long collar
D.
Long straddle
Question 38
Which of the following items is typically verified in the options agreement?
A.
SSN
B.
Address
C.
Date of birth
D.
Marital status
Question 39
A client of yours owns a $7,200,000 portfolio of numerous large-cap stocks from various regions and industries. The portfolio has a beta of 3. They ask you to recommend an investment that will fully hedge their portfolio against systematic risk. Which of the following is the best choice?
A.
212 long Sep OEX 1000 puts
B.
216 long Sep OEX 1000 puts
C.
220 long Sep OEX 1000 puts
D.
224 long Sep OEX 1000 puts
Question 40
On the same day in a margin account, an investor goes long 1 AXP May $75 call @ $13.50 and short 1 AXP May $90 call @ $6.75 when the market price is $84. The investor will breakeven or profit at all of the following prices, EXCEPT:
A.
$80.75
B.
$81.75
C.
$83.25
D.
$84.25
Question 41
A client of yours goes long a put in their brokerage account. Several months later, they exercise the option. For tax reporting purposes, what does the exercise establish?
A.
Capital gain if a gain results
B.
Sales proceeds
C.
Capital loss if a loss results
D.
Cost basis
Question 42
An investor goes long 1 Aug TYX 55 put @ $4.00 when the yield of 30 year Treasury bonds is 5.20%. What did they pay for the opening purchase of this option?
A.
$300
B.
$375
C.
$400
D.
$550
Question 43
A customer of your firm goes short 1 ZZZ May 140 put at $4 when the market price is $139. Several months later the market goes to $126 and the option is assigned. What is the tax consequence?
A.
$1,000 capital gain
B.
$1,000 capital loss
C.
$13,600 cost basis
D.
$13,600 sales proceeds
Question 44
The S&P 500 closed at 3,250 yesterday. The value of the index must fall to what point today for a market halt to be enacted for the rest of the day?
A.
2,600
B.
2,710
C.
2,828
D.
3,023
Question 45
All of the following will appear on a customer trade confirmation, EXCEPT:
A.
Fees and/or commissions
B.
Account number
C.
Capacity of firm (agency or principal)
D.
Risk exposure
Question 46
A client of yours owns a $1,500,000 portfolio of numerous large-cap stocks from various regions and industries. They ask you to recommend an investment that will fully hedge their portfolio against systematic risk. Which of the following is the best choice?
A.
6 long Oct OEX 1500 puts
B.
10 long Oct OEX 1500 puts
C.
14 long Oct OEX 1500 puts
D.
20 long Oct OEX 1500 puts
Question 47
On the same day, an investor goes long two LMN Jul 70 calls at $10 and short one LMN Jul 80 call at $1. All the options contracts were traded when LMN's market price was at $78. What is the maximum loss potential of the combined positions?
A.
$1,900
B.
$2,100
C.
$7,900
D.
Unlimited
Question 48
Submitting contrary exercise advice (CEA) to a financial firm prevents which of the following from occurring?
A.
Covering a short option
B.
Automatic exercise
C.
Expiration
D.
Margin calls on naked positions
Question 49
A client of yours holds 1 long Nov OEX 1070 put, which was initially obtained through an opening transaction months ago. It is now expiration Friday and the OEX is at 1022. The client asks you what will occur if they exercise the option. What should you advise?
A.
They will receive $4,800 from the writer
B.
They will pay $4,800 to the writer
C.
They will buy 100 different stocks for $107,000
D.
They will sell 100 different stocks for $107,000
Question 50
An investor is short 1 XYZ $240 call. XYZ stock goes through a 2:1 stock split. What will the adjusted option contract appear as?
A.
2 short XYZ $120 calls covering 50 shares per call
B.
1 short XYZ $120 call covering 200 shares
C.
1 short XYZ $240 calls covering 100 shares
D.
2 short XYZ $120 calls covering 100 shares per call
Question 51
An investor goes short 1 UNH May $225 call and long 1 UNH Apr $225 call when the market price is $217. Which of the following best represents the sentiment of this strategy?
A.
Premium spread to widen / options to expire
B.
Premium spread to narrow / options to exercise
C.
Premium spread to narrow / options to expire
D.
Premium spread to widen / options to exercise
Question 52
In an investor's account, you find 1 short CVX Nov $55 call and 1 long CVX Nov $65 call, which was obtained through a transaction creating a net credit of $5.50. The investor will profit or breakeven at all the following prices, EXCEPT:
A.
$58.25
B.
$59.00
C.
$60.50
D.
$61.50
Question 53
Which of the following options strategies is prohibited to be placed in a cash account?
A.
Going long a call
B.
Establishing a collar on a stock position
C.
Writing a put
D.
Going short a call spread
Question 54
A customer submits an opening sale order for a call options contract on KLM stock with a strike price of $55. At the time of the order submission, the market price of KLM stock was $58. When the transaction was executed, KLM's market price was $61. Assuming the total premium received was $800, what is the customer's breakeven price?
A.
$47
B.
$63
C.
$66
D.
$69
Question 55
A registered representative sends an email to fifteen of their clients regarding a new options-related product being offered by their broker-dealer. The product is well received and eight of the clients end up purchasing the product. Three weeks later, the representative sends the same email to ten more clients. What statements are true?
- I. The email is considered correspondence
- II. The email is considered a retail communication
- III. The email must be retained by the firm for at least three years
- IV. The email must be retained by the firm for at least six years
A.
II and IV
B.
II and III
C.
I and IV
D.
I and III
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