Equity Securities

Question 1

Outstanding Shares

Answer 1

these shares are in the hands of the public

Question 2

Bearish (options)

Answer 2

Buy (long) put

Sell (short/ write) call

Question 3

uncovered call writing (naked)

Answer 3

short stock, short call

this position has unlimited potential loss, and limited gain (premium received is max gain)

Question 4

Issued shares

Answer 4

authorized shares have been sold to investors

Question 5

record date

Answer 5

set by BOD, the owner of stock on record on this date is entitled to the dividend.

Question 6

income strategies

Answer 6

used to earn income in a flat or sideways market. has a short options contract
ex: long stock, short call
short stock, short call
short stock, short put

Question 7

dividends

Answer 7

these are paid to shareholders once declared by the BOD. They can be payable in cash or stock

Question 8

declaration date

Answer 8

date the dividend is declared by BOD

Question 9

common shareholder rights

Answer 9

• right to vote
• right to receive dividends
• right of free transfer (can sell, give, transfer)
• right to inspect the corporation’s books and records

Question 10

convertible preferred stock

Answer 10

allows the investor to exchange preferred shares for common shares. This gives the investor potential upside if the stock does well

Question 11

call option

Answer 11

gives the holder/buyer the right to buy shares of a stock at the strike price, from the writer/seller of the contract

Question 12

authorized shares

Answer 12

the max number of shares the issuer is permitted to sell.

Question 13

covered call writing

Answer 13

long stock, short call

income strategy is used by portfolio managers in a flat market. short call position generates income

Question 14

In-the- money (calls)

Answer 14

when the market price of the stock is above the strike price

Question 15

in-the- money (puts)

Answer 15

when the market price of the stock is below the strike price

Question 16

ex-dividend date

Answer 16

the date the price of the stock is reduced by the declared dividend. (one business date before the record date, set by FINRA)

Question 17

Treasury shares

Answer 17

Shares that have been issued and repurchased by the company. (has no voting rights and does not receive dividends)

Question 18

Proxy

Answer 18

absent shareholders vote on corporate issues by mail

Question 19

put option

Answer 19

gives holder/buyer the right to sell shares of stock at the strike price to the writer/ seller of the contract

Question 20

strike price

Answer 20

the price the option will be exercised at. (set when the option is written)

Question 21

Bullish (options)

Answer 21

Buy (long) call

sell (short/write) put

Question 22

round lot

Answer 22

100 shares of stock

Question 23

odd lot

Answer 23

share amounts in less than 100

Question 24

reverse stock split

Answer 24

shareholder receives fewer shares at an increased price

Question 25

common stock

Answer 25

ownership in a corporation, junior security, last to be paid in bankruptcy

Question 26

at the money

Answer 26

when the strike price is the same as the current market price

Question 27

types of preferred stocks

Answer 27

callable, convertible, participating, cumulative and straight

Question 28

Break even point (call)

Answer 28

Strike price + premium

Question 29

Break even point (put)

Answer 29

strike price - premium

Question 30

Book value

Answer 30

amount stock would be worth if assets were sold, liabilities were paid and other obligations were settled

Question 31

market value

Answer 31

price investors will pay in the secondary market

Question 32

voting rights

Answer 32

common share holders only have voting rights

Question 33

what can common shareholders vote on?

Answer 33

board of directors, mergers and acquisitions, changes in the number of authorized shares, stock splits

Question 34

what can common share holders not vote on?

Answer 34

dividends

Question 35

preferred stock

Answer 35

pays a fixed dividend that is paid before common stock and has no voting right

Question 36

stock split

Answer 36

shareholders receive additional shares, reducing the price

Question 37

payable date

Answer 37

the date the dividend is paid

Question 38

who sets the payable date

Answer 38

the Board of Directors

Question 39

What is suitable for investors with an income objective

Answer 39

preferred stock

Question 40

difference between common stock and preffered

Answer 40

preferred has no voting rights and is first to receive dividends

Question 41

Straight stock

Answer 41

has a fixed dividend

Question 42

cumulative stock

Answer 42

pays dividends in arrears

Question 43

participating stock

Answer 43

can be paid by a dividend beyond the fixed dividend

Question 44

callable stock

Answer 44

can be retired “called” early by the issuer

Question 45

convertible stock

Answer 45

convert preferred stock into common stock

Question 46

most junior security

Answer 46

common stock

Question 47

last to be paid in bankruptcy

Answer 47

common stock

Question 48

represents ownership in a comany

Answer 48

stock

Question 49

Set at the time the option is written

Answer 49

strike price

Question 50

largest number of shares

Answer 50

authorized stock

Question 51

who sets the declaration date

Answer 51

the Board of Directors

Question 52

who sets the record date

Answer 52

the Board of Directors

Question 53

Calculate Outstanding shares

Answer 53

issued shares - treasury shares