Stock Option+Margin

Question 1

What is a thinly traded issue?

Answer 1

A stock that may be difficult to sell short because the shares may not be available to borrow

Question 2

In determining if additional margin is required in a customer’s account, the broker-dealer will mark the account to the market:

Answer 2

Daily

Question 3

What is Nasdaq Level II System?

Answer 3

Firm quotes of all the market makers in a stock

Question 4

Prior to establishing a portfolio margin program for its clients, a broker-dealer is required to obtain approval from who?

Answer 4

FINRA

Question 5

What is the hypothecation agreement?

Answer 5

When the customer agrees to pledge the securities to the broker-dealer as collateral for the loan.

Question 6

Who must a trader at your firm who executes an order for a corporate bond report this to?

Answer 6

Trade Reporting and Compliance Engine (TRACE)

Question 7

An investor owns stock that has increased in value. What is the most suitable recommendation for an RR to make if the investor wants to protect her profit?

Answer 7

A sell stop order that’s placed below the current market price or a long put position

Question 8

Can options be purchased on margin?

Answer 8

No, 100% deposited

Question 9

What is an immediate-or-cancel order?

Answer 9

An order that must be executed immediately but does not need to be executed in its entirety AT THE PRICE. Part of the order may be executed.

Question 10

What does it mean when an order is given with a price?

Answer 10

Its a limit order and can be placed partially

Question 11

What is a stock that is not listed on an exchange or quoted in the OTC market?

Answer 11

Grey market

Question 12

How do you find the total dollar value of marginable securities in an account with marginable securities, non marginable securities, and cash?

Answer 12

Marginable securities + Cash x 2

Question 13

When is a margin disclosure document provided to customers?

Answer 13

At the time the account is opened and annually thereafter

Question 14

What price does a CUSTOMER pay when purchasing a stock?

Answer 14

The ASK/OFFER price

Question 15

What price will a CUSTOMER get when selling a stock?

Answer 15

bid price.

Question 16

What can Buy-stop orders or sell-stop orders provide?

Answer 16

Protection for a short
Protection for a long
Protection for Fluctuations in the market price of a stock

Question 17

What is the typical maintenance of a leveraged long ETF?

Answer 17

25%

Question 18

What is the typical margin requirement of a leveraged ETF on a short position?

Answer 18

30%

Question 19

What lists assists a broker-dealer in making a reasonable determination that a security is available to be borrowed from another broker-dealer in order to effect a short sale transaction?

Answer 19

An Easy to Borrow list

Question 20

What is acting in principal?

Answer 20

Buying for your own account and charging a markdown if youre buying and markup if youre selling.

Question 21

What is the minimum equity requirement for a pattern day trader?

Answer 21

$25,000, which must be deposited before the client may continue day trading

Question 22

What is the initial equity requirement in a margin account?

Answer 22

100% of the value or $2000, whichever is less.

Question 23

What is Regulation SHO (Shoshone indians)

Answer 23

Regulation SHO requires a broker-dealer to make a notation on every sell order ticket to indicate whether the transaction is a long sale or a short sale.

Question 24

When does a client act as an agent?

Answer 24

When a broker-dealer buys a security from a market maker (dealer) on behalf of its customer. Charges commission.

Question 25

When can A customer who purchases shares of an exchange-traded fund (ETF) may be extended credit?

Answer 25

Immediately

Question 26

What is an unsolicited order?

Answer 26

customer is entering the order using his own judgement and not relying on the RR’s recommendations