beta
measures volatility
alpha
measures performance
who is a Trusted contact person form for?
for a specified adult
t bills
52 weeks or less, not callable
specialized mutual funds
investment objective capital appreciation
Equity index fund
not actively managed
stabilizing bids
entered at or below public offering price
The Securities Act of 1934
regulated exchanges
The Securities Act of 1933
regulates new issues
prospectus
is a disclosure document that describes a financial security for potential buyers
In an interdealer trade, if the seller delivers before the settlement date,
The buyer may accept the stock or refuse it without prejudice.
straddle
options strategy involving the purchase of both a put and call option for the same expiration date and strike price on the same underlying security
spread
buying and selling options of the same class on the same underlying security but with different strike prices or expiration dates
hedge
is an investment that protects your portfolio from adverse price movements.
1035 exchange
a provision in the tax code which allows you, as a policyholder, to transfer funds from a life insurance, endowment or annuity to a new policy, without having to pay taxes.
full power of attorney
originate trades in the account and remove funds or securities.
subject to taxation at the federal, state, and local levels?
Collateralized mortgage obligations (CMOs)
75-5-10 rule
of 75% of the fund's net assets, no more than 5% of the fund's total assets can be in the voting shares of a single issuer. There are no restrictions on the other 25%; it can be invested as desired. Five percent of the $1 billion total is $50 million. The other 25% of the total assets ($250 million) can be invested in this stock without limitation. That makes the total possible investment into the voting shares of one issuer 30% of the total net assets or $300 million.
a bona fide quote
A quotation on a municipal security between dealers
Which of the following statements regarding callable municipal bonds are true?
Call premiums tend to decrease over time.Call prices are stated as a percentage of the principal amount to be called
A gain on the sale of a long equity put option is
always a short-term capital gain.
An ABC 40 call is quoted at 4.25 - 4.50, and an ABC 45 call is quoted at 1.50 - 2.00. What is the cost of establishing a debit spread?
To establish a debit spread, an investor buys a 40 call at the ask price of 4.50 and sells a 45 call at the bid price of 1.50. The net premium paid is (4.50 minus 1.50) times 100 shares, which equals $300.
If a customer with an unrealized gain on a short stock position wishes to protect her profit, she should enter
A buy stop order can be placed above the current market to protect the short stock position. If the stock trades at or above the stop price, the order is elected and becomes a market order to buy the stock, which will be used to cover the short position.
municipal original issue discount (OID)
tax free
a registered options principal (ROP).
The individual responsible for the overall supervision of all of a firm's options activities on behalf of its customers must be
rule 144a
An exemption to the holding period and volume restrictions of Rule 144 for qualified institutional buyers (QIBs)
general obligation bonds are not sold short because
thin markets may make it difficult to cover a short municipal position
Although the Federal Reserve Board (FRB) and FINRA have rules that set margin requirements, member firms may
increase these requirements through in-house rules.
1 equity option contract =
100 shares
1 premium point =
$100
instrinsic value
Strike price - current market value (calls)Current market value - strike price (puts)
In the money
Intrinsic value is positive
Time value
Premium - intrinsic value
Long call
right to buy (bullish)Max loss: Premium paid
Short call
obligation to sell (bearish)Max loss: Unlimited
Long put
right to sell (bearish)Max loss: Premium paid
Short put
obligation to buy (bullish)Max loss: breakeven to zero
Long stock, short call (hedge)
slightly bullish
Long Stock, Long Put (hedge)
Bullish. Max gain is unlimited. Max loss usually much smaller than the writer of the covered call. Only problem has to pay some money.
Short stock, Long call (hedge)
Attitude: Bearish. Max. Loss= XP-CMV+ Premium Paid. Max. Gain= CMV-Prem Paid. BE=CMV - Prem. Paid.
Short stock, Short put (hedge)
Slightly bearish, Max loss: Unlimited
Option transaction settlement=
Next business day (T+1)
Option exercise settlement=
same as the underlying security
Taxes for closed transactions (options)
capital gain or loss when closed
Taxes for expiration (options)
Capital gain or losses
Taxes when exercised (options)
cost basis of stock position adjusted when exercisedNo gain or loss until closed
Communications with public (options)
All Options advertising and sales literature must be approved by a register options principle (ROP)10 day prefiling is required (retail)No filing required (Correspondence and Institutional)
Suitability (options)
Suitable for those with:Higher incomes higher net worth more risk tolerancemore investment experience