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Series 7 > She chapter 2 pt 2 > Flashcards

She chapter 2 pt 2 Flashcards

1
Q

short-term unsecured promissory notes issued by companies. Used to raised cash to finance accounts receivable and seasonal inventory gluts. Maturities range from 1 to 270 days

A

commercial paper

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2
Q

direct short term debt obligations of the us government. Issued weekly with maturities 4 weeks, 13, 26 and at times 52

A

treasury bills

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3
Q

though t notes and t bonds are issued with longer maturities than t bills, once the notes and bonds have only one year left to maturity they are considered

A

money market instruments

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4
Q

agreement between buyer or seller to conduct a transaction and then reverse that transaction in the future.

A

repurchase agreements

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5
Q

a dealer agrees to buy securities from an investor and sell them back at a higher price

A

reverse repurchase agreement

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6
Q

The federal reserve bank mandates how much money its member banks must keep on reserve at the FRB. Any deposits in excess of the required amount are known as

A

federal funds

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7
Q

why would you place money market securities in a clients portfolio

A

highly liquid
very safe
a good place to invest money that will be needed soon(short term)

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8
Q

following risk associated with money market securites

A

rate of return is quite low (not suitable for long term investors )

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9
Q

These are derivative securities. This means that they derive their value from that of an underlying instrument, such as stock, stock index, interest rate or foriegn currency

A

options

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10
Q

under rule 144 how long must the a restricted security be held before it can be sold

A

6 months

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11
Q

Purchaser or holder
long
pays premium
is in control

A

buyer

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12
Q

writer
short
receives premium
takes on obligation

A

seller

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13
Q

an investor may buy calls ( )

A

go long

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14
Q

an investor may sell calls ( )

A

go short

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15
Q

long call( )

A

purchase

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16
Q

buyers of calls want the market price of the underlying stock to

A

rise

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17
Q

short call ()

A

sale

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18
Q

writers of calls what the market price of the underlying stock to

A

fall or stay the same

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19
Q

an investor may buy puts()

A

go long

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20
Q

an investor may sell puts()

A

go short

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21
Q

long put

A

purchase

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22
Q

buyers of puts want the market price of the underlying stock to

A

fall

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23
Q

short put

A

sale

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24
Q

a call buyer is ____because he wants the market to ___

A

bullish, rise

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25
a call writer is ___ because he wants the market to
bearish fall
26
a put buyer is ___ because he wants the market to
bearish fall
27
a put writer is ____ because he wants the market to
bullish rise
28
a call is in the money when a call is at the money when a call is out of the money when
the price of the stock exceeds the strike price of the call the price of the stock equals the strike price of the call when the price of the stock is lower than the strike price of the call
29
intrinsic value
is the same as the amount a contract is in the money
30
call has intrinsic value when
the market price of the stock is above the strike price of the call
31
do options ever have negative intrinsic values
no
32
options that are at the money or out of the money have an intrinsic value of
zero
33
a call option is at parity when
the premium equals intrinsic value
34
a put is in the money when a put is at the money when a put is out of the money when
when the price of the stock is lower than the strike price of the put when the price of the stock equals the strike price of the put when the price of the stock is higher than the strike price of the put
35
a put has intrinsic value when
when the market price of the stock is below the strike price of the put
36
a put value is at parity when
when the premium equals intrinsic value
37
long call buyers are bearish or bullish
bullish
38
by purchasing calls an investor can profit from an ____in a stocks price
increase
39
potential gain for call buyers is
unlimited
40
most a call buyer can lose is the
premium paid
41
call sellers(writes) are bearish or bullish
bearish
42
by writing call, an investor can profit
if the stock price falls
43
call writers max gain is
premium they received
44
call writers max loss
unlimited
45
put buyers are bearish or bullish
bearish
46
by purchasing puts, an investor can profit from a
decrease in a stocks price
47
the most a put buyer can lose is the
premium paid
48
put sellers(writers) bearish or bullish
bullish
49
a put writers maximum gain is the
premium recieved
50
a put writers max loss is the
put strikes price- the premium recieved
51
the clearing agent for listed options contracts. | Primary functions are to standardize, guarantee the performance of and issue option contracts
options clearing corporation
52
listed options trade from
9:30- 4:00pm et
53
listed options settle on
the next business day after the trade
54
listed options expire on
the third friday of the experation month at 11:59 pm
55
listed options can be exercised by
the owner from the time of purchase until they expire
56
any contract that is in the money by at least .01 will be
exercised automatically at expiration for the holder unless the holder gives a do not exercises instruction
57
when occ receives an exercise notice they
assign the exercise notice to a short broker dealer
58
the occ assigns exercises notices to short broker dealers on a
random basis
59
options contracts are traded with or without a certificate
without
60
an investors proof of ownership is the
trade confirmation
61
the owner of a call(party long the contract) has
the right to buy the stock at the strike price
62
the owner of a put(party long the contract)
has the right to sell the stock at the strike price
63
only owners of options contracts, those who are ___ in the contracts have the right to exercise them
long
64
writers of contracts, those who are ___the contracts, will be assigned to fulfill their obligation to perform: ether sell, if short a call, or buy if long a put
short
65
call or put buyers can exercise a contract any time before expiration if the contract is a
american style option
66
can be exercised on the expiration day only
european
67
the ___must be provided at or before the time the account approval
occ options disclosure document
68
all options accounts must untimately be
approved by a firms registered options principal
69
15 days after account approval, customer must
return signed options agreement
70
if the contract is covered
the writer already owns the underlying security
71
uncovered(naked)
writer does not own the underlying security
72
more risky naked on covered
naked
73
corporation or trust that pools investors money and then invests that money in securities on their behalf
investment company
74
investment companies are subject to regulations regarding how their shares are sold to the public, they are regulated by who
investment company act of 1940
75
classifies investment companies into 3 broad types face amount certificate companies unit investment trusts management investment companies
investment company act of 1940
76
have sub accounts that are defined as either units or open-end management investment companies
variable annuaties
77
a contract between an investor and an issuer in which the issuer guarentees payment of a stated(face amount) sum to the investor at some set date in the future
face amount certificates
78
an investment company organized under a trust indenture do not have board of directors (they have trustees)
unit investment trust
79
redeemable interests also known as
units or shares of beneficial interest

Series 7 (27 decks)

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