FINRA FINRA Options and Derivatives 1

Question 1

Which FINRA-related exam qualifies a registered representative to sell options to retail customers?

Accepted Answer

Series 7 with options approval

Answer

Passing the Series 7 (General Securities Representative) exam and receiving options approval from the firm qualifies a representative to sell options to retail customers.

Question 2

What is a 'call option' in securities trading?

Accepted Answer

A contract giving the buyer the right to purchase a security at a specified price before expiration

Answer

A call option grants the holder the right, but not the obligation, to buy the underlying security at the strike price on or before the expiration date.

Question 3

A 'put option' gives the buyer the right to:

Accepted Answer

Sell the underlying security at the strike price before expiration

Answer

A put option grants the holder the right, but not the obligation, to sell the underlying security at the strike price on or before the expiration date.

Question 4

What does it mean when an option is 'in the money' (ITM)?

Accepted Answer

The option has intrinsic value — exercising it now would be profitable

Answer

An option is in the money when exercising it immediately would result in a profit, meaning it has intrinsic value (e.g., a call when stock price > strike price).

Question 5

What is the 'premium' of an options contract?

Accepted Answer

The price paid by the buyer to the seller for the rights granted by the option

Answer

The premium is the market price of the option contract, representing what the buyer pays the seller for the rights conveyed.

(FINRA) FINRA Exams Practice Test

(FINRA) FINRA Exams Practice Test

FINRA FINRA Options and Derivatives 1