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Question 1 of 10
1. Question
Which of the following that every TPH organization transacting business with the public in uncovered option contracts shall develop, implement and maintain specific written procedures governing the conduct of such business which shall include?
I. Obtaining and reviewing the appropriate customer account documentation and financial information necessary for assessing the amount of credit extended to customers.
II. Specific criteria and standards to be used in evaluating the suitability of a customer for uncovered short option transactions.
III. Establishment of specific minimum net equity requirements for initial approval and maintenance of customer uncovered option accounts.
IV. The use of stress testing of portfolio margin accounts in order to monitor market risk exposure from individual accounts and in the aggregate.Correct
according to CBOE Rule 9.1. Opening of Accounts (f) Written Procedures for TPH Business in Uncovered Options Contracts. Every TPH organization transacting business with the public in uncovered option contracts shall develop, implement and maintain specific written procedures governing the conduct of such business which shall include:
(a) Specific criteria and standards to be used in evaluating the suitability of a customer for uncovered short option transactions.
(b) Establishment of specific minimum net equity requirements for initial approval and maintenance of customer uncovered option accounts.Incorrect
according to CBOE Rule 9.1. Opening of Accounts (f) Written Procedures for TPH Business in Uncovered Options Contracts. Every TPH organization transacting business with the public in uncovered option contracts shall develop, implement and maintain specific written procedures governing the conduct of such business which shall include:
(a) Specific criteria and standards to be used in evaluating the suitability of a customer for uncovered short option transactions.
(b) Establishment of specific minimum net equity requirements for initial approval and maintenance of customer uncovered option accounts. -
Question 2 of 10
2. Question
What is an exchangeable debt security that is exchangeable at the option of the holder on call by the issuer, or at maturity for a cash amount based on the reported market prices of the underlying stocks of an underlying index?
Correct
According to CBOE Rule 1.1 Definition Index-Linked Exchangeable Note
The term “Index-Linked Exchangeable Note” means an exchangeable debt security that is exchangeable at the option of the holder (subject to the requirement that the holder in most circumstances exchange a specified minimum amount of notes), on call by the issuer, or at maturity for a cash amount based on the reported market prices of the underlying stocks of an underlying index.Ownership, Stated Differential and Fixed Income are not in the rule.
Incorrect
According to CBOE Rule 1.1 Definition Index-Linked Exchangeable Note
The term “Index-Linked Exchangeable Note” means an exchangeable debt security that is exchangeable at the option of the holder (subject to the requirement that the holder in most circumstances exchange a specified minimum amount of notes), on call by the issuer, or at maturity for a cash amount based on the reported market prices of the underlying stocks of an underlying index.Ownership, Stated Differential and Fixed Income are not in the rule.
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Question 3 of 10
3. Question
Who is an individual who is authorized by a TPH organization to represent such TPH organization in all matters relating to the Exchange with respect to a Floor Broker or Market-Maker Floor Trading Permit?
Correct
According to CBOE Rule 1.1 Definition
Nominee
The term “nominee” means an individual who is authorized by a TPH organization, in accordance with Rule 3.9, to represent such TPH organization in all matters relating to the Exchange with respect to a Floor Broker or Market-Maker Floor Trading Permit.
Multiplier, Principal and Reporting AuthorityIncorrect
According to CBOE Rule 1.1 Definition
Nominee
The term “nominee” means an individual who is authorized by a TPH organization, in accordance with Rule 3.9, to represent such TPH organization in all matters relating to the Exchange with respect to a Floor Broker or Market-Maker Floor Trading Permit.
Multiplier, Principal and Reporting Authority -
Question 4 of 10
4. Question
Which of the following that “aggregate exercise price” exercise price of an option contract multiplied by?
I. One option contract in the series represents the delivery of other than 100 shares of the underlying security
II. Calculated by the Exchange based on market information the Exchange receives from OPRA
III. For equity options, the number of units of the underlying security
IV. For index options, the index multiplier for the underlying index covered by the option contractCorrect
According to CBOE Rule 1.1 Definition
The term “aggregate exercise price” means the exercise price of an option contract multiplied by
(a) For equity options, the number of units of the underlying security or
(b) For index options, the index multiplier for the underlying index covered by the option contract.Incorrect
According to CBOE Rule 1.1 Definition
The term “aggregate exercise price” means the exercise price of an option contract multiplied by
(a) For equity options, the number of units of the underlying security or
(b) For index options, the index multiplier for the underlying index covered by the option contract. -
Question 5 of 10
5. Question
What “index portfolio receipts” and “IPRs” do?
I. Represent an interest in a unit investment trust which holds the securities that comprise an index on which a series of IPRs is based
II. Issued by the trust in a specified aggregate minimum number in return for a “Portfolio Deposit” consisting of specified numbers of shares of stock plus a cash amount
III. Aggregated in the same specified minimum number, may be redeemed from the trust, which will pay to the redeeming holder the stock and cash then comprising the Portfolio Deposit
IV. Pay holders a periodic cash payment corresponding to the regular cash dividends or distributions declared and paid with respect to the component securities of the stock index on which the IPRs are based, less certain expenses and other charges as set forth in the trust prospectusCorrect
According to CBOE Rule 1.1 Definition
The terms “index portfolio receipts” and “IPRs” mean securities that
(a) Represent an interest in a unit investment trust which holds the securities that comprise an index on which a series of IPRs is based;
(b) Issued by the trust in a specified aggregate minimum number in return for a “Portfolio Deposit” consisting of specified numbers of shares of stock plus a cash amount; (c) when aggregated in the same specified minimum number, may be redeemed from the trust, which will pay to the redeeming holder the stock and cash then comprising the Portfolio Deposit; and
(c) Pay holders a periodic cash payment corresponding to the regular cash dividends or distributions declared and paid with respect to the component securities of the stock index on which the IPRs are based, less certain expenses and other charges as set forth in the trust prospectus. IPRs are “UIT interests” within the meaning of the Rules.Incorrect
According to CBOE Rule 1.1 Definition
The terms “index portfolio receipts” and “IPRs” mean securities that
(a) Represent an interest in a unit investment trust which holds the securities that comprise an index on which a series of IPRs is based;
(b) Issued by the trust in a specified aggregate minimum number in return for a “Portfolio Deposit” consisting of specified numbers of shares of stock plus a cash amount; (c) when aggregated in the same specified minimum number, may be redeemed from the trust, which will pay to the redeeming holder the stock and cash then comprising the Portfolio Deposit; and
(c) Pay holders a periodic cash payment corresponding to the regular cash dividends or distributions declared and paid with respect to the component securities of the stock index on which the IPRs are based, less certain expenses and other charges as set forth in the trust prospectus. IPRs are “UIT interests” within the meaning of the Rules. -
Question 6 of 10
6. Question
What “Index Portfolio Shares” and “IPSs” do?
I. Issued by an open-end management investment company based on a portfolio of stocks or fixed income securities designed to provide investment results that correspond generally to the price and yield performance of a specified foreign or domestic stock index or fixed income securities index
II. Issued by such an open-end management investment company in a specified aggregate minimum number in return for a deposit of specified number of shares of stock and/or a cash amount, or a specified portfolio of fixed income securities and/or a cash amount, with a value equal to the next determined net asset value
III. Aggregated in the same specified minimum number, may be redeemed at a holder’s request by such open-end management investment company, which will pay to the redeeming holder stock and/or cash, or a specified portfolio of fixed income securities and/or cash with a value equal to the next determined net asset value
IV. Deemed to refer to persons of female as well as male gender, and to include organizations, as well as individuals, when the context so requiresCorrect
According to CBOE Rule 1.1 Definition
Index Portfolio Shares and IPSs
The terms “Index Portfolio Shares” and “IPSs” mean securities that
(a) Issued by an open-end management investment company based on a portfolio of stocks or fixed income securities designed to provide investment results that correspond generally to the price and yield performance of a specified foreign or domestic stock index or fixed income securities index;
(b) Issued by such an open-end management investment company in a specified aggregate minimum number in return for a deposit of specified number of shares of stock and/or a cash amount, or a specified portfolio of fixed
income securities and/or a cash amount, with a value equal to the next determined net asset value; and
(c) Aggregated in the same specified minimum number, may be redeemed at a holder’s request by such open-end management investment company, which will pay to the redeeming holder stock and/or cash, or a specified portfolio of fixed income securities and/or cash with a value equal to the next determined net asset value.Incorrect
According to CBOE Rule 1.1 Definition
Index Portfolio Shares and IPSs
The terms “Index Portfolio Shares” and “IPSs” mean securities that
(a) Issued by an open-end management investment company based on a portfolio of stocks or fixed income securities designed to provide investment results that correspond generally to the price and yield performance of a specified foreign or domestic stock index or fixed income securities index;
(b) Issued by such an open-end management investment company in a specified aggregate minimum number in return for a deposit of specified number of shares of stock and/or a cash amount, or a specified portfolio of fixed
income securities and/or a cash amount, with a value equal to the next determined net asset value; and
(c) Aggregated in the same specified minimum number, may be redeemed at a holder’s request by such open-end management investment company, which will pay to the redeeming holder stock and/or cash, or a specified portfolio of fixed income securities and/or cash with a value equal to the next determined net asset value. -
Question 7 of 10
7. Question
What does “Professional” or any person or entity do?
I. Is not a broker or dealer in securities
II. That is not a Broker-Dealer
III. Places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s)
IV. An order for the account of a Public CustomerCorrect
According to CBOE Rule 1.1 Definition
Professional
The term “Professional” means any person or entity that
(a) Is not a broker or dealer in securities, and
(b) Places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s)Incorrect
According to CBOE Rule 1.1 Definition
Professional
The term “Professional” means any person or entity that
(a) Is not a broker or dealer in securities, and
(b) Places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s) -
Question 8 of 10
8. Question
What do you call a share traded on a national securities exchange that is an NMS stock and represents ownership of a security that provides for payment at maturity?
Correct
According to CBOE Rule 1.1 Definition
Index-Linked Security and ETN
The terms “Index-Linked Security” and “ETN” (Exchange-Traded Note) mean a share traded on a national securities exchange that is an NMS stock and represents ownership of a security that provides for payment at maturity as set forth in Rule 4.3.
Stated Differential, Report Market Prices and Fixed Income are not in the rule.Incorrect
According to CBOE Rule 1.1 Definition
Index-Linked Security and ETN
The terms “Index-Linked Security” and “ETN” (Exchange-Traded Note) mean a share traded on a national securities exchange that is an NMS stock and represents ownership of a security that provides for payment at maturity as set forth in Rule 4.3.
Stated Differential, Report Market Prices and Fixed Income are not in the rule. -
Question 9 of 10
9. Question
What do you call any person or entity that is registered, authorized, or licensed by a foreign governmental agency or foreign regulatory organization to perform the function of a broker or dealer in securities, or both?
Correct
According to CBOE Rule 1.1 Definition
Foreign Broker-Dealer
The term “foreign broker-dealer” means any person or entity that is registered, authorized, or licensed by a foreign governmental agency or foreign regulatory organization (or is required to be so registered, authorized, or licensed) to perform the function of a broker or dealer in securities, or both. For the purposes of this definition, the terms “broker” and “dealer” have the same meaning as provided in Section 3(a)(4) and 3(a)(5) of the Exchange Act, except that a “broker” or “dealer” may be a bank.Broker, Portfolio Deposit and Investment Company are not in the rule.Incorrect
According to CBOE Rule 1.1 Definition
Foreign Broker-Dealer
The term “foreign broker-dealer” means any person or entity that is registered, authorized, or licensed by a foreign governmental agency or foreign regulatory organization (or is required to be so registered, authorized, or licensed) to perform the function of a broker or dealer in securities, or both. For the purposes of this definition, the terms “broker” and “dealer” have the same meaning as provided in Section 3(a)(4) and 3(a)(5) of the Exchange Act, except that a “broker” or “dealer” may be a bank.Broker, Portfolio Deposit and Investment Company are not in the rule. -
Question 10 of 10
10. Question
What is an option contract that, subject to the provisions and to the Rules of the Clearing Corporation, may be exercised only on its expiration date?
Correct
According to CBOE Rule 1.1 Definition
European-Style Option
The term “European-style option” means an option contract that, subject to the provisions of Rule 6.20 and to the Rules of the Clearing Corporation, may be exercised only on its expiration date.
Portfolio Design, Fixed Income Securities and Exchangeable Note are not in rule.Incorrect
According to CBOE Rule 1.1 Definition
European-Style Option
The term “European-style option” means an option contract that, subject to the provisions of Rule 6.20 and to the Rules of the Clearing Corporation, may be exercised only on its expiration date.
Portfolio Design, Fixed Income Securities and Exchangeable Note are not in rule.