Trading Markets - Orders/Trading : Review Questions
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. stop orders allow a specific execution price to be "locked-in"
If a customer has a gain on a short stockposition 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 buy limit order will be entered D. A buy stop order will be entered
D. A buy stop order will be entered
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. Sell - Short
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 trades of borrowed shares D. Selling a long position
D. Selling a long position
Which of the following will NOT result in the establishment of a short position? A. Arbitrage transaction B. Sale of a security "against the box" C. Position trades of borrowed shares D. Selling unsettled shares that were purchased on the same day
D. Selling unsettled shares that were purchased on the same day
An order is placed to sell 200 shares of XYZ @ $40 Stop. Which statement is TRUE? A. The order is triggered if the market rises to $40 or higher, and becomes a limit order to sell at $40 or lower B. The order is triggered if the market falls to $40 or lower, and becomes a limit order to sell at $40 or higher C. The order is triggered if the market rises to $40 or higher, and becomes a market order to sell D. The order is triggered if the market falls to $40 or lower, and becomes a market order to sell
D. The order is triggered if the market falls to $40 or lower, and becomes a market order to sell
A member that has knowledge of a client order that has not been entered on a marketplace that could reasonably be expected to affect the market price of the security is prohibited from all of the following EXCEPT: A. entering a proprietary order for the purchase or sale of that security B. soliciting an order from another person for the purchase or sale of that security C. informing any other person, other than in the necessary course of business of the client order D. accepting an unsolicited order to buy from a client
D. accepting an unsolicited order to buy from a client
A sell limit order is executed when the market is: A. at or below the limit price when the market is falling B. at or above the limit price when the market is falling. C. at or below the limit price when the market is rising D. at or above the limit price when the market is rising
D. at or above the limit price when the market is rising
Orders that are placed below the current market are: A. all limits B. all stops C. sell limits and buy stops D. buy limits and sell stops
D. buy limits and sell stops OBLOSS
A member firm may use a third party to execute over-the-counter agency transactions for customer orders: A. under no circumstances B. if the resultant price is reasonably related to the inside market at that time C. if the resultant price is equal to the best available market at the time D. if the resultant price is better than the best available market at the time
D. if the resultant price is better than the best available market at the time
A customer places the following instructions with his registered representative: "Buy 100 shares of ABC if the market rises to $45, but don't buy the stock for more than $50." What is the appropriate order to be placed? A. Buy ABC @ 45 Stop 50 Limit B. Buy ABC @ 50 Stop 45 Limit C. Buy ABC @ 45 Stop. D. Buy ABC @ 50 Stop
A. Buy ABC @ 45 Stop 50 Limit
A customer wants to place an order to buy stock immediately. What order should be placed? A. Market B. Limit C. Stop D. Stop Limit
A. Market
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 purchase of 100 shares of ABC for the firm's trading account at $19.50 prior to executing the customer's order If a dealer holds a customer order, he or she cannot execute an order for the firm account that competes with that order - unless the customer order is executed first. Otherwise, the firm is "trading ahead" of the customer, which is prohibited. The customer has placed an order to buy 100 shares of ABC stock at $20. It is OK for the firm to buy the stock for its own account at $20.50 prior to executing the customer order, since the customer's limit price has not been met. However, 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 customer has a gain on a short stock position that she wishes to protect. The appropriate order is: A. buy stop order B. buy limit order C. market order D. sell stop order
A. buy stop order
A buy limit order is executed when the market is: A. falling at or below the limit price B. falling at or above the limit price C. rising at or below the limit price D. rising at or above the limit price
A. falling at or below the limit price
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. placed below the current market value and executed if the market falls
In order to protect a gain on a long stock position, a customer should place a: A. sell stop order B. sell limit order C. not held order D. fill or kill order
A. sell stop order
A member firm receives a large block order to buy 100,000 shares of XYZ stock, which is not actively traded. Which customer(s) of the firm can buy XYZ stock prior to the filling of the block trade? A. The registered representative who received the order B. Other customers of the firm who place buy orders, if the firm has information barriers in place C. Any customer of the firm who places an unsolicited order D. No customer can buy the stock until the block order to buy is filled
B. Other customers of the firm who place buy orders, if the firm has information barriers in place
The following order is entered: Sell 100 ABC @ 45 Stop Which statement is TRUE? A. The order may be elected at 45 or higher B. The order may be elected at 45 or lower C. The order will be executed at 45 or higher D. The order will be executed at exactly 45
B. The order may be elected at 45 or lower
All of the following information must be on an order ticket before it can be enteredEXCEPT: A. execution price if the order is not a market order B. amount of accrued interest to be paid C. size of the transaction D. customer account name and/or number
B. amount of accrued interest to be paid
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. falling markets at the market price
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. limit order
A customer places an order to sell bonds. The order reads "Sell 5M ABC 9s M '35 @ 90 GTC." The customer has entered a: A. stop order to sell at 90 B. limit order to sell at 90 C. market order to sell D. stop limit order to sell
B. limit order to sell at 90 Since a price is specified with no other qualifications, this is a limit order to sell $5,000 face amount ("5M") of 9% bonds maturing in 2035. Since a price is specified with no other qualifications, this is a limit order to sell. The customer wants to sell for 90% of par or more. Open sell limit orders are executed if the market rises.
When ABC stock is trading at $40.50, an equity trader places an order to buy 500,000 shares of the stock at 3:58 PM ET, filled at $40.60, and places another order to buy 400,000 shares at 3:59 PM filled at $40.90. Because of these actions, the stock closes at $41. The equity trader then uses those purchased shares to fill Market-On-Close orders to buy that the firm was holding for clients. This is an example of: A. Insider trading B. Front running C. Marking the close D. Painting the tape
C. Marking the close
In a rising market, which orders will be executed? A. All Stops B. All Limits C. Open Sell Limits and Open Buy Stops D. Open Sell Stops and Open Buy Limits
C. Open Sell Limits and Open Buy Stops OSLOBS
Which information is NOT on an order ticket? A Order size B. Duration of order C. Price of the transaction if it is a market order D. Name of security
C. Price of the transaction if it is a market order
A customer has asked his registered representative to sell 100 XYZ if the market falls to 50, but he does not want to sell for less than 45. The proper order is: A. Sell 100 XYZ @ 50 Stop Limit B. Sell 100 XYZ @ 45 Stop Limit C. Sell 100 XYZ @ 50 Stop 45 Limit D. Sell 100 XYZ @ 45 Stop 50 Limit
C. Sell 100 XYZ @ 50 Stop 45 Limit
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. Selling 100 shares after the client has exercised a call option Exercising a call makes a client an owner of the stock, so a sale that occurs on, or after, a call is exercised, is a long sale. Short sales are sales of borrowed shares, so any time the stock is not "owned" and must be borrowed, a short sale occurs. Selling stock that is owned is a long sale. An arbitrage transaction, where stock is bought on one exchange and simultaneously sold short on another exchange to lock in a price difference. The long position is delivered at a later date to replace the borrowed shares that were sold short.
A sell order for a customer is considered to be "long" if the customer is long: A. a call option on the stock being sold that has not yet been exercised B. the stock and will not deliver the shares on settlement C. a convertible bond that has been converted into the stock being sold for delivery on settlement D. a warrant on the stock being sold that has not yet been exercised
C. a convertible bond that has been converted into the stock being sold for delivery on settlement
A customer places an order to buy 1,000 shares of ABC stock at the market in his cash account. The order is executed and, when reporting the trade back to the customer, the registered representative notices that the trade was executed in the customer's margin account. Which statement is TRUE? The registered representative can move the trade to the customer's cash account: A. to correct the error without needing to take any additional action since these accounts are related to each other B. as long as a signed statement requesting the transfer is obtained from the customer C. as long as a cancel/rebill recordis created that documents the reasons for the account designation change and the manager approves in writing D. as long as FINRA is sent a quarterly report detailing all account designation changes whenever transactions were placed in incorrect customer accounts
C. as long as a cancel/rebill recordis created that documents the reasons for the account designation change and the manager approves in writing
Prior to the opening of the options exchange, an investor wishes to place an order to buy an option contract at a premium that is lower than the previous day's close. The order type to be placed is a(n): A. At the open order B. Limit order C. Stop order D. Not Held order
B. Limit order
Which orders, if executed, guarantee a specific price or better? A. Market Orders B. Buy Stops only C. All Limit Orders D. All Stop orders
C. All Limit Orders
Sell stop orders are: A. placed above the current market B. used by short sellers to protect positions C. triggered as the market rises D. triggered as the market falls
D. triggered as the market falls
