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