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    SERIES 9 EXAM REVIEW 2022+ TEST BANK
    SERIES 9 EXAM REVIEW 2022+ TEST BANK
    SERIES 9 EXAM REVIEW 2022+ TEST BANK
    Ebook424 pages6 hours

    SERIES 9 EXAM REVIEW 2022+ TEST BANK

    By The Securities Institute of America

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    About this ebook

    Passing the General Securities Sales Supervisor Exam (Series 9 and 10) qualifies an individual to supervise a firm's sales activities in corporate, municipal, and option securities; investment company products; variable contracts; and direct participation programs. The exam covers the full range of topics related to options regulation. All candi

    LanguageEnglish
    PublisherThe Securities Institute of America, Inc.
    Release dateMar 14, 2022
    ISBN9781937841423
    SERIES 9 EXAM REVIEW 2022+ TEST BANK

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      Book preview

      SERIES 9 EXAM REVIEW 2022+ TEST BANK - The Securities Institute of America

      Series_9_CSB_2022_V1.jpg

      SECURITIES INSTITUTE SERIES

      The Securities Institute of America proudly publishes world class textbooks, test banks and video training classes for the following Financial Services exams:

      Securities Industry Essentials exam / SIE exam

      Series 3 exam

      Series 4 exam

      Series 6 exam

      Series 7 exam

      Series 9 exam

      Series 10 exam

      Series 22 exam

      Series 24 exam

      Series 26 exam

      Series 39 exam

      Series 57 exam

      Series 63 exam

      Series 65 exam

      Series 66 exam

      Series 79 exam

      Series 99 exam

      For more information, visit the website at www.securitiesCE.com.

      Copyright © by The Securities Institute of America, Inc. All rights reserved.

      Published by The Securities Institute of America, Inc.

      No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of The Securities Institute of America, Inc.

      Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

      Contents

      About the Series 9 Exam

      About This Book

      About the Test Bank

      About The Securities Institute of America

      Chapter 1

      Option Basics

      Option Classification

      Bullish vs. Bearish

      Possible Outcomes for an Option

      Exercise Price

      Characteristics of All Options

      Managing an Option Position

      Buying Calls

      Buying Puts

      Option Premiums

      Intrinsic Value and Time Value

      Pretest

      Chapter 2

      Option Strategies

      Using Options as a Hedge

      Long Stock Long Puts/Married Puts

      Long Stock Short Calls/Covered Calls

      Short Stock Long Calls

      Short Stock Short Puts

      Multiple Option Positions and Strategies

      Collars

      Using a T Chart to Evaluate Option Positions

      Pretest

      Chapter 3

      Index, Interest Rate, and Currency Options

      Index Options

      Interest Rate Options

      Currency Markets

      Market Volatility Options (VIX)

      Flex Options

      Weekly Options

      Binary Options

      Mini Options

      Pretest

      Chapter 4

      The Options Marketplace

      The Option Clearing Corporation

      The Options Markets

      The Chicago Board OptionS Exchange

      Opening and Closing Option Prices

      Fast Markets and Trading Halts

      Clearly Erroneous Reports

      Execution Errors

      Order Execution

      Types of Orders

      Priority of Option Orders

      Trade Reporting

      Option Order Tickets

      Expiration and Exercise

      American vs. European Exercise

      Position and Exercise Limits

      Pretest

      Chapter 5

      Option Taxation and Margin Requirements

      Taxation of Options

      Option Contract Margin Requirements

      Margin Requirements Uncovered Call

      Margin Requirements Uncovered Puts

      Pretest

      Chapter 6

      Option Compliance and Account Supervision

      Duties of the ROSFP

      Option Account Compliance

      Outside Accounts for Employees

      Option Agreements

      Option Account Supervision

      Large Option Position Reporting Requirements

      Customer Confirmations and Account Statements

      Customer Complaints

      Communications with the Public

      FINRA Rule 2210 Communications with the Public

      Pretest

      Answer Keys

      Glossary of Exam Terms

      About the Series 9 Exam

      Congratulations! You are on your way to becoming a Series 9 general securities sales supervisor, registered to supervise a member firm’s option business. The Series 9 exam will be presented in a 55-question multiple-choice format. Each candidate will have one hour and 30 minutes to complete the exam. A score of 70% or higher is required to pass on both the Series 9 and Series 10 portions to become fully registered as a general securities sales supervisor.

      The Series 9 is as much a knowledge test as it is a reading test. Your textbook, video class and text banks from The Securities Institute will ensure that you have the required knowledge to pass the test and that you are confident in the application of that knowledge during the exam. The writers and instructors at The Securities Institute are subject-matter experts as well as Series 9 test experts. We understand how the test is written, and our proven test-taking techniques can dramatically improve your results.

      Taking the Series 9 Exam

      The Series 9 exam is presented in multiple-choice format on a touch-screen computer known as the PROCTOR system. No computer skills are required, and candidates will find that the test screen works in the same way as an ordinary ATM machine. Each test is made up of 55 questions that are randomly chosen from a test bank of thousands of questions. Each Series 9 exam will have several practice questions that do not count toward the final score. The test has a time limit of 1 hour and 30 minutes and is designed to provide enough time for all candidates to complete the exam. In addition to passing the Series 9 Option Module, each candidate must pass the Series 10 General Securities Sales Supervisor General Module.

      The Series 9 exam will be composed of 55 questions relating to options and option regulations.

      How to Prepare for the Series 9 Exam

      It is recommended that the candidate spend 30 to 40 hours preparing for the exam by reading the textbook, underlining key points, and by taking as many practice questions as possible.

      Test-Taking Tips

      Read the full question before answering.

      Identify what the question is asking.

      Identify key words and phrases.

      Watch out for hedge clauses, such as except and not.

      Eliminate wrong answers.

      Identify synonymous terms.

      Be wary of changing answers.

      What Type of Business May Be Conducted by Series 9 Registered Representatives?

      After passing the Series 9 exam, a registered person may supervise a member firm’s option business.

      What Score Is Needed to Pass the Exam?

      A score of 70% or higher is needed to pass the Series 9 exam.

      Are There Any Prerequisites for the Series 9?

      The Series 7 is a prerequisite of the Series 9 exam. The Series 10 is a corequisite for a person to be fully registered as a general securities sales supervisor for a member firm.

      How Do I Schedule an Exam?

      Ask your firm’s principal to schedule the exam for you or to provide a list of test centers in your area. In most states, you must be sponsored by a FINRA member firm prior to making an appointment. The Series 9 exam may be taken any day that the exam center is open.

      What Must I Bring to the Exam Center?

      A picture ID is required. All other materials will be provided, including a calculator and scratch paper.

      How Long Will It Take to Get the Results of the Exam?

      The exam will be graded as soon as you answer your final question and hit the Submit for Grading button. It will take only a few minutes to get your results. Your grade will appear on the computer screen, and you will be given a paper copy at the exam center.

      If you do not pass the test, you will need to wait 30 days before taking it again. If you do not pass on the second try, you will need to wait another 30 days. If you fail a third time, you must wait 6 months to take the test again.

      About This Book

      The writers and instructors at The Securities Institute have developed the Series 9 textbook, exam prep software, and videos to ensure that you have the knowledge required to pass the test and to make sure that you are confident in the application of that knowledge during the exam. The writers and instructors at The Securities Institute are subject-matter experts as well as Series 9 test experts. We understand how the test is written, and our proven test-taking techniques can dramatically improve your results.

      Each chapter includes notes, tips, examples, and case studies with key information, hints for taking the exam, and additional insight into the topics. Each chapter ends with a practice test to ensure that you have mastered the concepts before moving on to the next topic.

      About the Test Bank

      This book is accompanied by a test bank of hundreds of questions to further reinforce the concepts and information presented here. The test bank is provided to help students who have purchased our book from a traditional bookstore or from an online retailer such as Amazon. If you have purchased this textbook as part of a package from our website containing the full version of the software, you are all set and simply need to use the login instructions that were emailed to you at the time of purchase. Otherwise to access the test bank please email your purchase receipt to [email protected] and we will activate your account. This test bank provides a small sample of the questions and features that are contained in the full version of the exam prep software.

      If you have not purchased the full version of the exam prep software with this book, we highly recommend it to ensure that you have mastered the knowledge required for your exam. To purchase the exam prep software for this exam, visit The Securities Institute of America online at:

      www.securitiesce.com or call 877‐218‐1776.

      About The Securities Institute of America

      The Securities Institute of America, Inc. Helps thousands of securities and insurance professionals build successful careers in the financial services industry every year. In more than 25 years we have helped students pass more than 400,000 exams. Our securities training options include:

      Classroom training

      Private tutoring

      Interactive online video training classes

      State-of-the-art exam prep test banks

      Printed textbooks

      ebooks

      Real-time tracking and reporting for managers and training directors

      As a result, you can choose a securities training solution that matches your skill level, learning style, and schedule. Regardless of the format you choose, you can be sure that our securities training courses are relevant, tested, and designed to help you succeed. It is the experience of our instructors and the quality of our materials that make our courses requested by name at some of the largest financial services firms in the world.

      To contact The Securities Institute of America, visit us on the Web at:

      www.securitiesce.com or call 877‐218‐1776..

      Chapter 1

      Option Basics

      Option Classification

      Options are classified as to their type, class, and series. There are two types of options: calls and puts.

      Option Types

      Call Options

      A call option gives the buyer the right to buy, or to call, the stock from the option seller at a specific price for a certain period of time. The sale of a call option obligates the seller to deliver or sell that stock to the buyer at that specific price for a certain period of time.

      Put Options

      A put option gives the buyer the right to sell, or to put, the stock to the seller at a specific price for a certain period of time. The sale of a put option obligates the seller to buy the stock from the buyer at that specific price for a certain period of time.

      Option Classes

      An option class consists of all options of the same type for the same underlying stock.

      Option Series

      An option series is the most specific classification of options and consists only of options of the same class with the same exercise price and expiration month. For example, all XYZ June 50 calls would be one series of options, and all XYZ June 55 calls would be another series of options.

      Bullish vs. Bearish

      Bullish

      Investors who believe that a stock price will increase over time are said to be bullish. Investors who buy calls are bullish on the underlying stock; that is, they believe that the stock price will rise and have paid for the right to purchase the stock at a specific price known as the exercise price or strike price. An investor who has sold puts is also considered to be bullish on the stock. The seller of a put has an obligation to buy the stock and, therefore, believes that the stock price will rise.

      Bearish

      Investors who believe that a stock price will decline are said to be bearish. The seller of a call has an obligation to sell the stock to the purchaser at a specified price and believes that the stock price will fall and is therefore bearish. The buyer of a put wants the price to drop so that he or she may sell the stock at a higher price to the seller of the put contract and is also considered to be bearish.

      Buyer vs. Seller

      Possible Outcomes for an Option

      Exercised

      If the option is exercised, the buyer has elected to exercise the right to buy or sell the stock, depending on the type of option involved. Exercising an option obligates the seller to perform under the contract.

      Sold

      Most individual investors will elect to sell their rights to another investor rather than exercise their rights. The investor who buys the option will acquire all the rights of the original purchaser.

      Expire

      If the option expires, the buyer has elected not to exercise the right, and the seller of the option is relieved of the obligation to perform.

      Exercise Price

      The exercise price is the price at which an option buyer may buy or sell the underlying stock, depending on the type of option involved in the transaction. The exercise price is also known as the strike price.

      Characteristics of All Options

      All standardized option contracts are issued and their performance is guaranteed by the Options Clearing Corporation (OCC). Standardized options trade on the exchanges, such as the Chicago Board Options Exchange (CBOE) and the NYSE Alternext.

      All option contracts are for one round lot of the underlying stock, or 100 shares. To determine the amount that an investor either paid or received for the contract, take the premium and multiply it by 100. If an investor paid $4 for 1 KLM August 70 call, the investor paid $400 for the right to buy 100 shares of KLM at $70 per share until August. If another investor paid $2 for 1 JTJ May 50 put, the investor paid $200 for the right to sell 100 shares of JTJ at $50 until May.

      Managing an Option Position

      Both the buyer and seller, in an option trade, establish the position with an opening transaction. The buyer has an opening purchase, and the seller has an opening sale. To exit the option position, an investor must close out the position. The buyer of the option may exit a position through:

      A closing sale.

      Exercising the option.

      Allowing the option to expire.

      The seller of an option may exit or close out a position through:

      A closing purchase.

      Having the option exercised or assigned.

      Allowing the option to expire.

      Most individual investors do not exercise their options and will simply buy and sell options in much the same way as they would buy or sell other securities.

      Buying Calls

      An investor who purchases a call believes that the underlying stock price will rise and that he or she will be able to profit from the price appreciation by purchasing calls. An investor who purchases a call can control the underlying stock and profit from its appreciation while limiting the loss to the amount of the premium paid for the calls. Buying calls allows investors to maximize their leverage, and they may realize a more significant percentage return based on their investment. An investor may also elect to purchase a call to lock in a purchase price for a security if the investor currently lacks the funds required to purchase the security but will have the funds available in the near future. When looking to establish a position, buyers must determine:

      Their maximum gain.

      Their maximum loss.

      Their breakeven.

      Maximum Gain for a Long Call

      When an investor has a long call position, the maximum gain is always unlimited. The investor profits from a rise in the stock

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