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Wiley Series 4 Exam Review 2014 + Test Bank The Registered Options Principal Qualification Examination,9781118719558
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Wiley Series 4 Exam Review 2014 + Test Bank The Registered Options Principal Qualification Examination

by Unknown
Edition:
2nd
ISBN13:

9781118719558

ISBN10:
1118719557
Format:
Paperback
Pub. Date:
12/16/2013
Publisher(s):
Wiley
List Price: $195.00

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Summary

Wiley Series 4 Exam Review prepares candidates for the Registered Options Principal Qualification Examination, which tests an aspiring manager of a FINRA member firm?s options personnel and options accounts. The book addresses options investment strategies, supervision of sales activities and trading practices, supervision of employees, business conduct, and recordkeeping and reporting requirements. Candidates will gain access to an online test bank for each chapter and thorough preparation for the FINRA exam.

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 146

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 160

Prospectus to Be Provided to Aftermarket Purchasers 160

SEC Disclaimer 161

Misrepresentations 161

Private Placements/Regulation D Offerings 161

Rule 144 162

The Securities Exchange Act of 1934 163

The Securities Exchange Commission/SEC 164

Extension of Credit 165

Margin Accounts 165

Guaranteeing a Customer’s Account 167

Day Trading Accounts 167

Commingling Customer’s Pledged Securities 167

Currency Transactions 168

The Patriot Act 168

U.S. Accounts 169

Foreign Accounts 169

Securities Investor Protection Corporation Act of 1970 (SIPC) 169

Customer Coverage 170

The Insider Trading and Securities Fraud Enforcement Act of 1988 170

Firewall 171

Trading Suspensions 171

Issuers Repurchasing Their Own Securities 172

Tender Off ers 173

Stockholders Owning 5 Percent of an Issuer’s Equity Securities 174

Short Sales 175

Affirmative Determination 175

Regulation SHO 176

Rule 200 Definitions and Order Marking 176

Rule 203 Security Borrowing and Delivery Requirements 177

Threshold Securities 178

Market Making During Syndication 179

Regulation M, Rule 101 179

Penalty Bids 180

Regulation M, Rule 102 180

Regulation M, Rule 103 181

Passive Market Makers’ Daily Purchase Limit 181

Regulation M, Rule 104 182

Syndicate Short Positions 183

Regulation M, Rule 105 183

Issuing Research Reports 184

Research Reports Required Disclosures 185

Regulation FD Fair Disclosure 186

Customer Accounts 188

Subsidiary (Secondary) Records 188

Securities Position Book (Ledger) Stock Record 188

Order Tickets 188

Confirmations and Notices 188

Monthly Trial Balances and Net Capital Computations 189

Employment Applications 189

Records Required to Be Maintained for Three Years 189

Records Required to Be Maintained for Six Years 189

Records Required to Be Maintained for the Life of the Firm 190

Hiring New Employees 190

Resignation of a Registered Representative 191

Registration Exemptions 192

Persons Ineligible to Register 192

Disciplinary Actions Against a Registered Representative 193

Termination for Cause 193

Outside Employment 194

Private Securities Transactions 194

Gift Rule 194

Sharing in a Customer’s Account 195

Borrowing and Lending Money 196

Customer Complaints 196

Mediation 196

Code of Arbitration 197

The Arbitration Process 197

Simplified Arbitration 198

Larger Disputes 198

Awards Under Arbitration 198

Investor Information 199

Violations and Complaints 199

Resolution of Allegations 199

Minor Rule Violation 200

Firm Element Continuing Education 200

Regulatory Element 201

Pretest 203

ANSWER KEYS 207

GLOSSARY OF EXAM TERMS 213

INDEX 279



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