3.7 Administration and Compliance
What method is used to assign exercise notices to broke-dealers with short positions by Options Clearing Corporation (OCC)?
Random-selection basis
A customer of a broker-dealer makes it known that they would like to trade options in their account. The first step to accommodate the request is which of the following?
the registered representative should determine the suitability of options trading for the customers
An investor holds a November 35 call that was purchased on March 3. The investor, if wanting to exercise the contract, would need to do so no later than
the third Friday of November
Listed options expire on
the third Friday of the expiration month
Your customer has purchased an MJS October 35 call at 4. Their proof of ownership will be
the trade confirmation
Listed option transactions settle
trade day + 1 business day
Automatic exercise will occur at expiration for any equity option contract that is in the money by at least
0.01
If a customer sold calls to open, which of the following transactions would be allowed if the options agreement was not returned signed within 15 days?
Buy calls to close
Your customer has purchased 1 February 35 call at 2 on Tuesday, December 4. This transaction will settle on
Wednesday December 5
When the options clearing corporation receives a notice to exercise, it will assign that notice to
a short broker-dealer
When a customer signs the options agreement, this is the customer's affirmation to all of the following except
all long positions will be exercised
the options disclosure document must be provided
at or before the time of account approval
If a customer sold puts to open, which of the following transactions would be allowed if the options agreement was not returned signed within 15 days
buy puts to close
A customer recently approved to trade options buys a put contract for the account's initial transaction. If the customer fails to return the signed option agreement within 15 days of account approval, which of the following transactions is the customer permitted to make?
closing sale
All of the following actions must be completed before a customer enters the first option order except
completion of (signing of) the options agreement
The holder of an in-the-money option contract gives a do not exercise instruction (notice) to your broker-dealer. This notice
is used to avoid automatic exercise at expiration
A customer who has written an option contract receives an assignment notice. This customer is
now obligated to either buy or sell the underlying stock at the strike price
A registered representative opens a new options account for a customer, in which order must the following actions take place?
obtain essential facts from the customer, obtain approval from the branch manager, enter the initial order, and obtain a signed options agreement
Typically, a corporation would not issue
option contracts
the performance of listed options contracts is guaranteed by which of the following
options clearing corporation
Which of the following documents must be provided to the customer prior to approval of an options contract
options disclosure document
An investor buys 1 DWQ May 70 call at 2, giving the investor the right to buy 100 shares of DWQ at $70 per share. All the specifications of the transaction are set or standardized by the Option Clearing Corporation except
premium of 2
If the options agreement is not returned signed within 15 days of account approval, which of the following transactions could a customer perform if the initial transaction was buy calls to open
sell calls to close
If a customer bought puts to open, which of the following transactions would be allows if the options agreement was not returned signed within 15 days
sell puts to close
While a branch office manager can initially approve an options account for trading, it must ultimately be approved by
the firms registered options prinicipal
Listed options can be exercised by
the holder from the time of purchase until they expire
If an investor is long an option contract and wishes to exercise the contract, the investor notifies the broker-dealer, who then notifies
the options clearing corporation
A member firm is assigned an exercise notice by the Options Clearing Corporation. The member firm may assign the exercise notice to one of its short customers by any of the following methods except
to the customer having the largest short position
When must a new options customer return a signed option account agreement form
within 15 calendar days of the account approval