30 Days - Generally new issues cannot be margined for how many days?
What is acceptable during the cooling off period? - Sending a prospectus or accepting an indication of
interest (b/ c not an offer in the Securities Act of 1933)
A customer buys 1 ABC Jan 50 Call @ $4 and 1 ABC Jan 50 Put @ $5 on the same day in a margin account
when ABC closes at $49. The customer must deposit: - $900 (4 Call + 5 Put)
Foreign investments are subject to: - Political & Exchange Risk
NMFBA - Non-Managed Fee Based Acct
Bkg acct where a flat annual fee is imposed on all trades performed in a year.
A married couple has a joint account at your firm held as "JTWROS." The representative has been
informed by both the husband and the wife that they are involved in a messy divorce battle. The wife
has contacted the representative with a request to withdraw a large sum from the account. The
representative should: - - incorrect
- contact legal dept, withdraw restriction
Regulation T initial margin - 50% but min. initial margin needs to be at least 2000
A customer sells 1 ABC Jan 70 Put @ $5 and buys 1 ABC Jan 90 Put @ $19 when the market price of ABC
is $75. The maximum potential gain is: - Maximum potential gain=600
Premiums: 19-5=14
The customer sells the stock at $90 and must purchase the stock at $70. Here there is a 20 point, or
$2,000 gain
,2000-1400=600
A customer sells 1 ABC Jan 100 Call @ $8 and buys 1 ABC Jan 120 Call @ $3 when the market price of
ABC is $105. The maximum potential gain is: - $500
Sell 1 ABC Jan 100 Call@ $8
Buy 1 ABC Jan 120 Call@ $3
____________________
$5 Credit
In a credit spread, the maximum potential gain is the credit.
Which positions are profitable in a rising market?
I Debit put spread
II Credit put spread
III Long straddle
IV Short stock - II, III
Credit Put Spread & Long Straddle
Credit put spreads (being a net seller), like simply selling a put, are profitable if the market rises. the
puts expire "out the money" and the premium credit received is the profit. Long straddles are profitable
if the market falls or rises. Short stock positions are profitable when the market falls.
Long Stock / Long Put Breakeven - Long Stock/ Long Put Breakeven= Stock Cost + Premium
A customer buys 100 shares of XYZ at $51 and buys 1 XYZ Jan 50 Put @ $5. The maximum potential loss
is: - $600
, 51-50=1 + 5 (prem.)= 6
In order to recommend a variable annuity to a customer, which statements are TRUE?
I The customer must be informed, in general terms, of the material features of the product
II The representative must believe that the customer would benefit from the product's features
III The representative must believe that the variable product as a whole, the underlying separate
accounts to which funds are allocated, and riders to the policy, are suitable
IV The representative must sign a statement that all required representations and determinations were
completed - All of the above
If a stock dividend is paid in a long margin account, which of the following statements are TRUE?
I Equity is reduced
II Equity remains the same
III The number of shares remains the same
IV The number of shares increases - II and IV
Equity remains the same.
The number of shares increases.
Error in Confirmation - If there is an error in confirmation or reporting (as happened in this case), the
customer gets the actual trade price. Note, in contrast that if the firm made an error in execution, any
loss due to the firm's error must be absorbed by the firm.
Placement Ratio - bonds sold by UW/total new bonds issued
A customer sells 5 ABC Jan 30 Straddles for a total premium of $3,500. At expiration, ABC closes at $21,
and the customer is exercised. As a result, the customer will have a: - $1000 loss
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