Trading Markets Orders/Practices

A customer has a gain on a short stock position that she wishes to protect. The appropriate order is: A buystop order B buylimit order C market order D sell stop order

A

A transaction is mistakenly placed in John Jones' cash account when it should have been recorded in John Jones' margin account. To correct this: A the registered representative must create acancel/rebill recorddetailing the reasons for the designation change B no cancel/rebill record is required because both accounts are owned by the same individual C the branch manager or compliance official must approve of the change verbally prior to initiation D the branch manager or compliance official is not required to approve of the change since the accounts are owned by the same individual

A

An unpriced order that is routed to a securities trading venue is a: A market order and is filled immediately B market order and is not guaranteed a fill C limit order and is filled immediately D limit order and is not guaranteed a fill

A

Buy limit orders are: A placed below the current market value and executed if the market falls B placed above the current market value and executed if the market falls C only permitted during regular market hours D only placed as day orders

A

The order to "Sell 100 ABC @ 90 Stop" is: Correct answer A. You chose this answer A elected at 90 or below and executed at the next available price B elected at 90 or below and executed at a price that is at or above 90 C elected at 90 or above and executed at the next available price D elected at 90 or above and executed at a price that is at or above 90

A

A broker-dealer holds a limit order to buy 100 shares of ABC stock at $20.00 for a customer. Which of the following trades is an example of trading ahead of a customer? A The purchase of 100 shares of ABC for the firm's trading account at $19.50 prior to executing the customer's order B The purchase of 100 shares of ABC for the firm's trading account at $20.50 prior to executing the customer's order C The long sale of 100 shares of ABC out of the firm's trading account to the customer at $20.00 D The short sale of 100 shares of ABC out of the firm's trading account to the customer at $20.00

A- the firm cannot buy for its own account at $19.50 until the customer order has been executed, since $19.50 is within the customer's limit. It is perfectly acceptable for the firm to sell the customer the stock at $20 out of its inventory account. It makes no difference whether the firm sells this stock long to the customer or if it sells the stock short to the customer. In trading accounts, firms routinely maintain both long and short positions.

A sell stop order is executed in: A falling markets at the price specified B falling markets at the market price C rising markets at the price specified D rising markets at the market price

B

An order ticket to sell 100 shares of ABC short means that the seller will: A deliver shares that are owned on settlement date B deliver shares that are borrowed on settlement date C not deliver shares on settlement date, but will deliver a due bill instead D not deliver shares on settlement date, but will deliver the shares on a future date

B

An order to sell 100 shares of ABC at 50 GTC on the Specialist's book (DMM) is a: A market order B limit order C stop order D stop limit order

B

Sell stop orders: A are used to sell securities at prices that are higher than the current market B are used to sell securities at prices that are lower than the current market C guarantee a specific execution price or better D are used by short sellers to protect positions

B

Which statement is TRUE about an order to: Buy 100 ABC @ 45 Stop 50 Limit? A The order is elected at $45 or higher and executed at $50 or higher B The order is elected at $45 or higher and executed at $50 or lower C The order is elected at $45 or lower and executed at $50 or higher D The order is elected at $45 or lower and executed at $50 or lower

B- This is a Buy Stop Limit order. Buy Stop orders are placed higher than the current market, and are filled as the market rises. The guidelines of the stop price must be adhered to first. A buy stop is elected as the market rises to the stop price ($45) or higher. As soon as the market hits $45 or higher, the order is elected, and turns into a limit order to buy at the limit price of $50. An order to buy at $50 means to buy at $50 or lower. Thus, the order is elected at $45 or higher; and executed at $50 or lower.

A customer places an order to "Buy 100 ABC @ 90 Stop." The customer wishes to buy the stock at: A $90 per share B the market price, if the market falls to $90 per share or lower. C the market price, if the market rises to $90 per share or higher D a price that is no higher than $90 per share

C

All of the following can create a short position EXCEPT: A Buying a stock on one exchange and simultaneously selling it on another exchange B Selling stock for a customer that is not owned by that customer C Selling 100 shares after the client has exercised a call option D Selling stock for the firm's account that is not owned by the firm

C

All of the following customers are considered to be long 100 shares of ABC stock EXCEPT: A a customer who has bought 100 ABC shares in a regular way trade that has not yet settled B a customer who owns two ABC convertible bonds, convertible into 50 shares each, who has given irrevocable instructions to convert C a customer who owns 1 ABC call contract D a customer who owns 100 ABC warrants and has exercised those warrants

C

All of the following information must be on an order ticket before it can be entered EXCEPT: A size of transaction B execution price if the order is not a market order C commission D customer account name and/or number

C

All of the following orders are placed above the market EXCEPT: A Buy Stop - Day B Sell Limit - GTC C Buy - MKT D Buy Stop - GTC

C

All of the following statements are true regarding stop orders EXCEPT: A stop orders can protect a profit on a long stock position B stop orders can limit a loss on a long stock position C stop orders allow a specific execution price to be "locked-in" D stop orders are placed "away" from the current market

C

An index arbitrage trading desk places sequential buy orders at the market opening for securities included in the index to raise their price against the current index value. Which statement is TRUE? A These transactions can only be effected on an upbid B This is an illegal practice known as Marking To Market C This is an illegal practice known as Marking The Open D This is an illegal practice known as Painting The Tape

C

Sell limit orders: A are used to sell securities at prices that are lower than the current market price B are used by clients seeking rapid executions C guarantee a specific execution price or better. D guarantee a fill by the end of that trading day

C

The customer is buying "5M" of bonds, or $5,000 par value at a price of 85% = _________ execution price. This is a buy limit order, where the customer does not wish to pay more than 85% for the bonds. A $850 B $1,000 C $4,250 D $5,000

C

A new customer calls a representative and says the following: "I own 1,000 shares of DEF stock, which is currently held at another broker-dealer. I want to sell the shares at the market." The representative accepts the order from the customer. The order ticket should be marked: A long sale B long sale - exempt C short sale D short sale - exempt

C- A sale is marked "short" if the shares must be borrowed to settle the sale.

Which orders, if executed, guarantee a specific price or better? A Market Orders B BuyStops only C All Limit Orders D All Stop orders

C- If a "Stop" order is elected, it becomes a market order to be filled at the first opportunity. Thus, the actual price at which the order is executed is not known. On the other hand, all "Limit" orders specify that the execution must comply with the limit price specified or better. Thus, limit orders are filled at that price or better. Market orders by definition do not specify, or guarantee, a price.

A buy stop order is executed in: A falling markets at the price specified B falling markets at the market price C rising markets at the price specified D rising markets at the market price

D

A customer places an order to sell 100 XYZ at 38 Stop. This means that the order: A can only be filled at 38 exactly B will be filled at 38 or better only after a trading halt C is elected at 38 or higher and executed at the next available price D is elected at 38 or lower and executed at the next available price

D

A firm's market making desk, aware that the firm is about to publish a bullish research report on ABCD stock, purposefully increases its long position in order to satisfy anticipated retail demand. This action is: A permitted without restriction B permitted as long as the research report is released within 48 hours of the first trade made to increase the firm's position C permitted as long as NASDAQ is notified, in writing, of the impending research report D prohibited

D

All of the following can result in the establishment of a short position EXCEPT: A Arbitrage transaction B Sale of a security "against the box" C Position tradesof borrowed shares D Selling along position

D

If a customer has a gain on a short stock position that he or she wishes to protect, which statement is TRUE? A A sell limit order will be entered B A sell stop order will be entered C A buylimit orderwill be entered D A buystop orderwill be entered

D

Which order, if executed, would guarantee a specific price or better? A Sell Stop B Buy Stop C Market D Sell Limit

D

A customer places an order to sell 100 shares of ABC stock that he cannot deliver by settlement date. The order ticket should be marked: A Sell -MKT B Sell -GTC C Sell - Long D Sell - Short

D- A long sale is the sale of shares which the customer owns and will deliver on settlement date. A short sale is the sale of shares which the customer does not own. Therefore, in order to effect delivery on settlement date, the short seller must borrow the shares. In essence, a short seller is selling borrowed shares.

Which statement is TRUE? A Both stop and limit orders guarantee price but not execution. B Both stop and limit orders guarantee execution but not price C Stop orders guarantee price but not execution while limit orders guarantee execution but not price D Stop orders guarantee execution but not price while limit orders guarantee price but not execution

D- If a "Stop" order is elected, it becomes a market order to be filled at the first opportunity. Once triggered the Stop order becomes a market order to buy or sell. Thus, the actual price at which the order is executed is not known - but, if triggered, the order will be filed. On the other hand, a "Limit" order specifies that the execution must comply with the limit price specified or better. Thus, all limit orders guarantee is that if the trade can be executed, it will be filled at the limit price or better

A customer enters an order to sell 100 shares of ABC at 75 stop limit when the market price of ABC is 78. The tape then shows the following: The order will be executed at: abc 77...75...74.50...74...76...75 A 74.00 B 74.50 C 75.00 D 76.00

D- Sell stop orders are placed lower than the current market and are elected (or triggered) at or below the stop price - here, the stop price is at 75. The market first goes to 75 and this is where the order is elected. Then the order becomes a limit order to sell at 75 or better (or higher). The order is executed at 76, as this is the first trade "at or above" the limit.

In a falling market, which orders will be executed? A Open BuyStops and Open Sell Stops B Open BuyLimits and Open Sell Limits C Open Sell Limits and Open Buy Stops D Open Buy Limits and Open Sell Stops

D- The orders that are executed if the market drops are "OBLOSS" - Open Buy Limits and Open Sell Stops. The orders that are executed in a rising market are "OSLOBS" - Open Sell Limits and Open Buy Stops.