Wiley Series 4 Exam Review 2016 + Test Bank: The Registered Options Principal Examination(Wiley FINRA)

The go-to guide to acing the Series 4 Exam! The Registered Options Principal Qualification Examination (Series 4) was designed to test a candidate's knowledge of the rules and statutory provisions applicable to the supervisory management of a firm's options personnel and options accounts. After passing the exam, a registered person may supervise a FINRA member firm's options business and is qualified to oversee trades on all forms of options, from equity options to foreign currency options to options on government and mortgage-backed securities. The subject areas covered in the exam are: Options Investment Strategies; Supervision of Sales Activities and Trading Practices; Supervision of Employees, Business Conduct; and Recordkeeping and Reporting Requirements. Created by the experts at the Securities Institute of America, Inc., Wiley Series 4 Exam Review 2016 arms you with what you need to score high on the test. Designed to let you build and fine-tune your knowledge of all areas covered in the exam and to guarantee that you're prepared mentally and strategically to take the test, it provides: Dozens of examples Assorted practice questions for each subject area covered in the exam Priceless test-taking tips and strategies Helpful hints on how to study for the test, manage stress, and stay focused Wiley Series 4 Exam Review 2016 is your ticket to passing the Series 4 test on the first try—with flying colors!

Table of Contents:
ABOUT THE SERIES 4 EXAM xiii ABOUT THIS BOOK xvii ABOUT THE TEST BANK xix ABOUT THE SECURITIES INSTITUTE OF AMERICA xxi CHAPTER 1 OPTION BASICS 1 Option Classification 1 Option Classes 2 Option Series 2 Bullish vs. Bearish 2 Possible Outcomes for an Option 3 Characteristics of All Options 4 Managing an Option Position 4 Buying Calls 5 Selling Calls 6 Buying Puts 8 Selling Puts 9 Option Premiums 11 Intrinsic Value and Time Value 13 Pretest 15 CHAPTER 2 OPTION STRATEGIES 19 Using Options as a Hedge 19 Long Stock Long Puts/Married Puts 19 Long Stock Short Calls/Covered Calls 22 Ratio Call Writing 24 Short Stock Long Calls 24 Short Stock Short Puts 27 Multiple Option Positions and Strategies 29 Long Straddles 29 Short Straddles 32 Selling a Straddle Against Long Stock 34 Spreads 35 Analyzing Spreads/Price Spreads 36 Bull Call Spreads/Debit Call Spreads 37 Spread Premiums Bull Call Spread 38 Bear Call Spreads/Credit Call Spreads 39 Spread Premiums Bear Call Spread 41 Bear Put Spreads/Debit Put Spreads 41 Spread Premiums Bear Put Spread 43 Bull Put Spreads/Credit Put Spreads 43 Spread Premiums Bull Put Spread 45 Condor Spreads 47 Combinations 49 Collars 49 Synthetic Risk and Reward 50 Using a T Chart to Evaluate Option Positions 51 Pretest 57 CHAPTER 3 INDEX, INTEREST RATE, AND CURRENCY OPTIONS 61 Index Option Settlement 61 Exercising an Index Option 62 Index Option Positions 63 Capped Index Options 63 Interest Rate Options 64 Price-Based Options 64 Premiums Price-Based Options Treasury Notes and Bonds 64 Premiums Price-Based Options Treasury Bills 65 Rate-Based Options 65 Currency Markets 66 Spot Rates 66 Foreign Currency Options 67 Foreign Currency Option Basics 67 Buying Foreign Currency Calls and Puts 68 Market Volatility Options/VIX 69 Flex Options 70 Weekly Options 71 Binary Options 71 Pretest 73 CHAPTER 4 THE OPTIONS MARKETPLACE 77 The Option Clearing Corporation 77 The Options Markets 78 The Chicago Board Option Exchange 79 Opening and Closing Option Prices 81 Fast Markets and Trading Halts 81 Order Execution 82 Types of Orders 82 Priority of Option Orders 85 Trade Reporting 85 Option Order Tickets 86 Cabinet Trade/Accommodation Trade 87 Expiration and Exercise 87 American vs. European Exercise 88 Position and Exercise Limits 88 Stock Splits and Stock Dividends 89 Reverse Stock Split 90 Pretest 93 CHAPTER 5 OPTION TAXATION AND MARGIN REQUIREMENTS 97 Taxation of Options 97 Closing an Option Position 98 Exercising a Call 98 Exercising a Put 99 Protective Puts 99 Covered Calls 99 Establishing a Long Position in a Margin Account 100 An Increase in the Long Market Value 101 Special Memorandum Account/SMA Long Margin Account 102 A Decrease in the Long Market Value 104 Minimum Equity Requirement Long Margin Accounts 105 Establishing a Short Position in a Margin Account 106 A Decrease in the Short Market Value 107 Special Memorandum Account (SMA) Short Margin Account 107 An Increase in the Short Market Value 108 Minimum Equity Requirement Short Margin Accounts 109 Combined Margin Accounts 110 Option Contract Margin Requirements 111 Margin Requirements when Exercising a Call 111 Margin Requirements when Exercising a Put 112 Margin Requirements when Writing a Call 112 Margin Requirements Uncovered Call 113 Margin Requirements when Writing a Put 115 Margin Requirements Uncovered Puts 115 Margin Requirements when Establishing a Call Spread 117 Margin Requirements when Establishing a Put Spread 120 Short Straddle Margin Requirements 123 Short Combination Margin Requirements 123 Short Index Option Margin Requirements 124 Short Currency Option Margin Requirements 127 Pretest 131 CHAPTER 6 OPTION COMPLIANCE AND ACCOUNT SUPERVISION 135 Duties of the ROP/ROSFP 135 Additional Duties of the ROP/ROSFP 136 Option Account Compliance 137 Option Agreement 139 Option Account Supervision 139 Large Option Position Reporting Requirements 141 Operating a Discretionary Account 142 Managing Discretionary Accounts 142 Customer Confirmations and Account Statements 143 Mailing Instructions 144 Account Transfer 144 Customer Complaints 145 Trade Complaints Between Members 146 Broker Dealers on the Premises of Other Financial Institutions 147 Regulation S-P 147 Communications with the Public 148 FINRA Rule 2210 Communications with the Public 149 Pretest 153 CHAPTER 7 SECURITIES INDUSTRY RULES AND REGULATIONS 157 The Securities Act of 1933 157 The Prospectus 158 Tombstone Ads 159 Free Riding and Withholding/FINRA Rule 5130 159 The Final Prospectus 161 Prospectus to Be Provided to Aftermarket Purchasers 162 SEC Disclaimer 162 Misrepresentations 162 Private Placements/Regulation D Offerings 163 Rule 144 164 The Securities Exchange Act of 1934 165 The Securities Exchange Commission/SEC 166 Extension of Credit 166 Margin Accounts 167 Guaranteeing a Customer’s Account 168 Day Trading Accounts 168 Portfolio Margin Accounts 169 Securities Backed Lines of Credit 169 Commingling Customers’ Pledged Securities 170 Currency Transactions 170 The Patriot Act 170 U.S. Accounts 172 Foreign Accounts 172 Securities Investor Protection Corporation Act of 1970 (SIPC) 172 Customer Coverage 173 The Insider Trading and Securities Fraud Enforcement Act of 1988 173 Firewall 174 Trading Suspensions 174 Issuers Repurchasing Their Own Securities 175 Tender Offers 176 Stockholders Owning 5 Percent of an Issuer’s Equity Securities 177 Short Sales 178 Affirmative Determination 178 Regulation SHO 179 Rule 200 Definitions and Order Marking 179 Rule 203 Security Borrowing and Delivery Requirements 180 Threshold Securities 181 Market Making During Syndication 182 Regulation M, Rule 101 182 Penalty Bids 183 Regulation M, Rule 102 183 Regulation M, Rule 103 184 Passive Market Makers’ Daily Purchase Limit 184 Regulation M, Rule 104 185 Syndicate Short Positions 186 Regulation M, Rule 105 186 Issuing Research Reports 187 Research Reports Required Disclosures 188 Regulation FD Fair Disclosure 189 Customer Accounts 191 Subsidiary (Secondary) Records 191 Securities Position Book (Ledger) Stock Record 191 Order Tickets 191 Confirmations and Notices 191 Monthly Trial Balances and Net Capital Computations 192 Employment Applications 192 Records Required to Be Maintained for Three Years 192 Records Required to Be Maintained for Six Years 192 Records Required to Be Maintained for the Life of the Firm 193 Other Record Retention Requirements 193 Hiring New Employees 193 Resignation of a Registered Representative 194 Registration Exemptions 195 Persons Ineligible to Register 196 Disciplinary Actions Against a Registered Representative 196 Termination for Cause 197 Outside Employment 198 Private Securities Transactions 198 Gift Rule 198 Sharing in a Customer’s Account 199 Borrowing and Lending Money 200 Customer Complaints 200 Mediation 201 Code of Arbitration 201 The Arbitration Process 202 Simplified Arbitration 202 Larger Disputes 202 Awards Under Arbitration 203 Investor Information 203 Violations and Complaints 203 Resolution of Allegations 204 Minor Rule Violation 204 Firm Element Continuing Education 205 Regulatory Element 205 Pretest 207 ANSWER KEYS 211 GLOSSARY OF EXAM TERMS 217 INDEX 283