2nd 100 Pages Flashcards
Intrinsic value
The potential profit available when exercising an option “call up”
At the money
Phrase used when the option on the underlying stock is trading at the exercise price of the option
CMV- 70
- same
BUY- 70(SP)
Time Value of Money (TV)
P= IV + TV
For example;
CMV=100
Buy 95 Call @ 5
What’s the TV?
A. In the money b/c call says if the SP
Parity
When the intrinsic value equals the premium
Time Value
Premium- intrinsic value
Premium
Intrinsic value + Time Value
Buyers have …
Rights
Sellers have…
Obligations
Index and foreign currency options are…
Cash Settled
Hedge with your…
Fear
The best options when hedging is to…
Buy or long a put
For protection you…
Buy
For income you…
Sell
A short sell is?
Open
A long buy is?
Open
A long sell is?
Closed
A short buy is?
Closed
Under OCC EXPIRATION=
11:59 pm ET on Saturday after third Friday
Growth and income
Combination fund
Specialized fund
Sector fund
Index Funds
Low Fees + high diversification
Like S&P
Global Funds
U.S.
International Funds
Non U.S.
Inverse Funds (short or reverse Funds)
Hedge for mutual funds
Opposite
ETFs
EXCAHNGE TRADED FUNDS
Continuous pricing
Mutual funds
Price once per day
ETNs
Exchange traded notes
DEBTS
BANK
NO INTEREST
NO Principal protection
Maximum sales charges
8 1/2% of the pop
Dollar cost averaging
Average cost lower than average price
Same amount into the same funds over a period of time
Alternative investments
Direct
Participation
Programs
Oil drilling
Intangible drilling costs generate immediate deductions
Oil and gas programs
Exploratory also known as wildcatting
High risk and reward
REITs
Real estate investment trusts
75% invested in real estate
Rental income
Capital gains
Beta measures what?
Systematic risk
Interest rates go up
Bonds go down
The higher the duration
The more volatile
Bonds have the most?
Inflation risk
The better the grade/credit
The less default risk
Leverage
Too much debt
Legislative or political risk
Risk foreign investors will lose money due to changes in a country‘s government
An investor currently owns $100,000 of US treasury bonds maturing in 12 years. The most significant risk facing this client is?
Interest rate risk
Cooling off period
20 day minimum
Preliminary prospectus
RED HERRING
Missing final affective date and final price
The primary difference between an underwriting syndicate and a selling group is?
The syndicate assumes liability for unsold shares
The selling group does not
Prospectus delivery
With or before delivery of final confirmation.
Can NEVER be marked on
Disclosure document
Offering circular
Regulation D
Private placements
Rule 144
Sale of control and restricted securities
Sets the conditions under restricted unregistered securities sold or resold
RULE 144 A
To provide a mechanism for the sale of privately place securities that do not have or not require an SEC registration in place
RULE 145
Aims to protect stockholders of any company that proposed to re-organize its ownership structure
What risk cannot be reduced by diversifying in equity portfolio??
Market risk
Stop orders
These are nets to catch the limit of loss
The securities exchange act of 1934
Regulates secondary trading created securities and exchange commission (SEC)
Slobs
Buy calls
Bliss
Buy puts
Floor brokers determine what?
Time and price of trades
Who has to sign the new account form?
Only the principal
Reg T
Gives the FRB the authority
Who’s social is used when you doUGMA OR UTMA account??
The minors Social Security number
Update amend alter change
30 days
How long should member firms retain records of any customer account?
At least 6years after it is closed
Regulation T
A rule that applies to transactions that occur in both cash and margin accounts
SIPC only protects the individual equities
Customer delivery on sales
Requested by settlement date
Required within 10 business days
Regular way settlement for US government bonds is
Next business day
T+1
Regular way settlement for municipal bonds
T+2
Regular way settlement for corporate bonds
T+2
Tracking executed trades registered reps should
Always go to the supervisor/broker dealer or principal first
Due bills
Someone paid your dividend for you
FIFO
Capital gains
Most detrimental to customer
Progressive taxes
Gets higher the more money you make
Regressive taxes
Charged equally regardless of income
LIFO
Annuities and non-qualified plans
FIFO
IRS DEFAULT
Capital gains
Mutual funds
Stocks
Real estate
REITS
Securities
Qualified plans
Ordinary income tax
Individual
IRA
Earnings grow tax-deferred
Premature withdraw 10% penalty before 59 1/2
No SMUT trading allowed for retirement plans
Short
Margin
Uncovered
Tangibles
What’s the max amount of employees for a simple plan?
100
Securities act of 1933
Paper prospectus primary act
Regulation of new issues
Securities exchange act of 1934
People and places act
Excessive trading while ignoring clients objectives and interest
Churning
The investment advisors from act of 1940
RIA
A B C
ADVICE. BUSINESS. COMPENSATION.
Insider trading act of 1988
Civil penalties greater of 1 million or three times profit
Criminal penalties up to 5 million and up to 20 years jail sentence
Telephone consumer protection act of 1991 administered by FCC
Time restrictions include 8 AM to 9 PM local time
Regulation national market system
Broad sweeping regulation in acted to bring trading in trade reporting uniformity to US securities markets
Maloney act of 1938
Created SROs
Pegging
Preventing the stock from moving either direction
