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Focus Review 1 - Flashcards

0
Q

Trading - Secondary Market

ECN - 4th Market

A

Institutional investors:

  • Mutual funds
  • Pension Funds
  • others trading big blocks between themselves

-no human labor involved

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1
Q

Issuing Primary Market - Reg A

A

of the Securities Act of 1933

  • small issue or small dollar exemption
  • new issue of $5mil or less in 12 month period
  • if offering is done by an affiliated person, max that can be raised is $1.5mil in 12 month period
  • File an issuing statement called A1
  • distribute an offering circular - 48 hours prior to purchase or at purchase with a 5 day right of recission
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2
Q

Trading - Secondary Market

Exchange Floor Functions

A
  • Specialists can stop the stock for public orders

- trader guarantees an order fill at a specified price for a period of time

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3
Q

Trading - Secondary Market

Stop - Limit

A

sell 55.50 stop 56, triggers at 55.5, sells at 56 or higher

buy 66 stop 65, triggers at 66, buys at 65 or lower

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4
Q

Trading - Secondary Market

NASDAQ

A

1

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5
Q

Debt Instruments

Money Market Debt

A

1

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6
Q

Debt Instruments

Interest Rate Risk

A

1

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7
Q

Debt Instruments

Liquidity Risk

A

risk that an asset cannot be sold quickly

risk that selling quickly will result in a substantial loss

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8
Q

Debit Instruments

Selling Concession of 1 1/2 points

A

1

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9
Q

Option Contracts

Leap Contracts

A

last up to 39 months

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10
Q

Option Contracts

Customer Accounts

A

to open:

  1. New account form completed
  2. Customer Loan agreement and margin agreement must be fully executed unless customer is only buying options
  3. options disclosure document must be provided to the registered option principal approving the account
  4. The customer must return the signed options account agreement to the brokerage firm within 15 days of the new account approval. However, if the customer is late signing the option agreement and sending it back, only closing transactions may occur
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11
Q

Option Contracts

Debt/Yield Options

A

options on gov debt securities trade:
-bond options and yield options

  • bond options: buy puts (sell calls) when you think interest is going up
  • yield options: buy calls (sell puts) when you think interest is going up
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12
Q

Option Contracts

Exercise

A

Expire Saturday following the third Friday of the month at 11:59ET

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13
Q

Option Contracts

Covered Writes

A
  • partial hedge
  • writes options share for share against a stock position
  • establish a position on the opposite side of the market
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14
Q

Option Contracts

Spreads

A
  • vertical - price
  • horizontal - time
  • long and short positions of the same type, buy call and sell call\
  • debit call spread - money is being paid to create spread - bullish
    • buys a call with a lower strike price and sells a call with a higher price
    • money increases as the stock rises and goes through the short call

-debit put spread - buy a put with a higher strike price and sell a put with a lower strike price - Bearish

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15
Q

Option Contracts

Straddles

A
  • a call and a put on the same underlying security with the same strike price and the same expiration date
  • buyer of straddle anticipates major market movemement, not sure which way
    • makes money if the movement is big enough in either direction

-Long straddle - max gain unlimited

16
Q

Customer Accounts

Maintenance Rules

A
  • Long maintenance is 25% of LMV
    • market value at maintenance = debit balance/.75
  • Short maintenance is 30% of LMV
  • stock trading at low price:
    • $5-$17.50 rule is $5 per share
    • $2.5 - $5, rule is 100%
    • under $2.50, $2.50 a share
17
Q

Customer Accounts

Equity Excess to a Current Reg T

A
  • SMA on the long side
    • E - 1/2 LMV
    • 50% of the market appreciation
  • SMA on the short side
    • E - 1/2 SMV
    • 150% of the market depreciation
18
Q

Investment Companies

Exchange Privileges within Families of Funds

A
  • exchanged without additional sales charge at NAV

- if there is a gain, it will be taxable

19
Q

Investment Companies

Equity Linked Securities (ELKS)

A
  • Hybrid debt instrument linked to the equity markets
  • performance linked to a stock, group of stocks, or index
  • guarantees principal and offers small returns
  • structured as annuities, mutual funds, or CDs
20
Q

Investment Companies

Holding Company Depository Receipts (HOLDRs)

A
  • Traded on NYSE AMEX

- allows investors to trade one security comprised of a bucke of stocks in a specific market sector or industry

21
Q

Investment Companies

Mortgage

A

1

22
Q

Investment Companies

Hedge Funds

A

1

23
Q

Direct Participation Programs

General Characteristics

A

1

24
Q

Insurance Contracts

Assumed Interest Rate

A

1

25
Q

Insurance Contracts

Sales Charge Structure - Variable Life

A
  • max 9% over a period up to 20 years
  • 45 day free look
  • 50% max sales charge during year 1
  • if surrendered in first 2 years, owner is entitled to the NAV of their account plus a refund of any charge that exceeds 30% of the first year’s premium plus any charge that exceeded 10% of the second year’s premium
26
Q

Analysis

Yield Curve

A

1

27
Q

Analysis

Coincident Indicators

A
  • current indices
  • personal income
  • GDP
28
Q

Analysis

Economic Trends

A

1

29
Q

Analysis

Wash Sales

A
  • investor sells a security in order to establish a tax loss, if the investor then buys back the security within 30 days
  • must not purchase 30 days before the sale or 31 days after, 61 day window
30
Q

Regulations

NYSE

A

1

31
Q

Regulations

Securities Act of 1934

A

1

32
Q

Regulations

Investment Advisers act of 1940

A

1

Focus Review (1 decks)

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