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Question 1 of 10
1. Question
When would a Floor Broker may then accept orders directly from public customers?
I. The organization clears and carries the customer account.
II. The order is sent electronically to the Exchange.
III. The organization has entered into an agreement with the public customer to execute orders on its behalf.
IV. The regular review and testing of these risk analysis procedures by an independent unit such as internal audit or other comparable group.Correct
According to CBOE Rule 3.50. Floor Brokers. A Floor Broker who is the nominee of such organization may accept orders directly from public customers where:
(a) The organization clears and carries the customer account or
(b) The organization has entered into an agreement with the public customer to execute orders on its behalf.Incorrect
According to CBOE Rule 3.50. Floor Brokers. A Floor Broker who is the nominee of such organization may accept orders directly from public customers where:
(a) The organization clears and carries the customer account or
(b) The organization has entered into an agreement with the public customer to execute orders on its behalf. -
Question 2 of 10
2. Question
What should an Exchange do when a Trading Permit Holder that does not maintain an office in the United States responsible for preparing and maintaining financial and other reports required to be filed with the Securities and Exchange Commission?
I. Prepare all such reports, and maintain a general ledger chart of account and any description thereof, in English and U.S. dollars
II. Positions binary options on the same broad-based index that have different exercise settlement amounts shall be aggregated
III. Reimburse the Exchange for any expense incurred in connection with examination of the Trading Permit Holder to the extent that such expenses exceed the cost of examining a Trading Permit Holder located within the continental United States
IV. Ensure the availability of an individual fluent in English knowledgeable in securities and financial matters to assist the representatives of the Exchange during examinationsCorrect
According to CBOE Rule 3.4. Foreign TPHs
A Trading Permit Holder that does not maintain an office in the United States responsible for preparing and maintaining financial and other reports required to be filed with the Securities and Exchange Commission and the Exchange must:
(a) Prepare all such reports, and maintain a general ledger chart of account and any description thereof, in English and U.S. dollars;
(b) Reimburse the Exchange for any expense incurred in connection with examination of the Trading Permit Holder to the extent that such expenses exceed the cost of examining a Trading Permit Holder located within the continental United States; and
(c) Ensure the availability of an individual fluent in English knowledgeable in securities and financial matters to assist the representatives of the Exchange during examinations.Incorrect
According to CBOE Rule 3.4. Foreign TPHs
A Trading Permit Holder that does not maintain an office in the United States responsible for preparing and maintaining financial and other reports required to be filed with the Securities and Exchange Commission and the Exchange must:
(a) Prepare all such reports, and maintain a general ledger chart of account and any description thereof, in English and U.S. dollars;
(b) Reimburse the Exchange for any expense incurred in connection with examination of the Trading Permit Holder to the extent that such expenses exceed the cost of examining a Trading Permit Holder located within the continental United States; and
(c) Ensure the availability of an individual fluent in English knowledgeable in securities and financial matters to assist the representatives of the Exchange during examinations. -
Question 3 of 10
3. Question
What time the exercises may occur through in the event of such a trading halt?
Correct
According ro CBOE Rule 8.46. Other Restrictions on Options Transactions and Exercises
(3) Exercises of American-style, cash-settled index options shall not be prohibited during a trading halt that occurs at or after 4:00 p.m. In the event of such a trading halt, exercises may occur through 4:20 p.m. 4:50 p.m., 4:30 p.m., 3:00 p.m. are not in the rule.Incorrect
According ro CBOE Rule 8.46. Other Restrictions on Options Transactions and Exercises
(3) Exercises of American-style, cash-settled index options shall not be prohibited during a trading halt that occurs at or after 4:00 p.m. In the event of such a trading halt, exercises may occur through 4:20 p.m. 4:50 p.m., 4:30 p.m., 3:00 p.m. are not in the rule. -
Question 4 of 10
4. Question
Which options communication where no Trading Permit Holder or member organization or associated person should be use?
I. Contains statements suggesting the certain availability of a secondary market for options.
II. Obtaining and reviewing the appropriate customer account documentation and financial information necessary for assessing the amount of credit extended to customers
III. Fails to reflect the risks attendant to options transactions and the complexities of certain options investment strategies.
IV. Managing the impact of credit extension on the TPH organization’s overall risk exposure.Correct
According to CBOE Rule 9.15. Options Communications(d) General Rule. No Trading Permit Holder or member organization or associated person shall use any options communication which:
(a) Contains statements suggesting the certain availability of a secondary market for options.
(b) Fails to reflect the risks attendant to options transactions and the complexities of certain options investment strategies.Incorrect
According to CBOE Rule 9.15. Options Communications(d) General Rule. No Trading Permit Holder or member organization or associated person shall use any options communication which:
(a) Contains statements suggesting the certain availability of a secondary market for options.
(b) Fails to reflect the risks attendant to options transactions and the complexities of certain options investment strategies. -
Question 5 of 10
5. Question
When is an order systematized in a format approved by the Exchange, either before it is sent or upon receipt on the Exchange’s trading floor?
I. The order is sent electronically to the Exchange.
II. The order that is sent to maintain specific written procedures.
III. The order that is sent to be used in evaluating the suitability of a customer for uncovered short option transactions.
IV. The order that is sent to the Exchange non-electronically is input electronically into the Exchange’s systems contemporaneously upon receipt on the Exchange, and prior to representation of the order.Correct
According to CBOE Rule 5.7. Entry of Orders and Quotes(f) Except as provided below, each order, cancellation of, or change to an order transmitted to the Exchange must be “systematized” in a format approved by the Exchange, either before it is sent to the Exchange or upon receipt on the Exchange’s trading floor. An order is systematized if:
(a) The order is sent electronically to the Exchange or
(b) the order that is sent to the Exchange non-electronically (e.g., telephone orders) is input electronically into the Exchange’s systems contemporaneously upon receipt on the Exchange, and prior to representation of the order.Incorrect
According to CBOE Rule 5.7. Entry of Orders and Quotes(f) Except as provided below, each order, cancellation of, or change to an order transmitted to the Exchange must be “systematized” in a format approved by the Exchange, either before it is sent to the Exchange or upon receipt on the Exchange’s trading floor. An order is systematized if:
(a) The order is sent electronically to the Exchange or
(b) the order that is sent to the Exchange non-electronically (e.g., telephone orders) is input electronically into the Exchange’s systems contemporaneously upon receipt on the Exchange, and prior to representation of the order. -
Question 6 of 10
6. Question
What is exchange transaction that reduces or eliminates a long position in an option contract?
Correct
According to CBOE Rule 1.1 Definition
Closing Writing Transaction-The term “closing writing transaction” means an Exchange transaction that reduces or eliminates a long position in an option contract.Admissible, Burden of Proof and Chambers are not in the rule.
Incorrect
According to CBOE Rule 1.1 Definition
Closing Writing Transaction-The term “closing writing transaction” means an Exchange transaction that reduces or eliminates a long position in an option contract.Admissible, Burden of Proof and Chambers are not in the rule.
-
Question 7 of 10
7. Question
What specific information should a Trading Permit Holder input into the Exchange’s systems with respect to the order prior to the representation of the order?
I. The option symbol
II. The expiration month
III. Buy or sell
IV. Call or putCorrect
According to CBOE Rule 5.7. Entry of Orders and Quotes (f) (1) With respect to non-electronic, market and marketable orders sent to the Exchange, the Trading Permit Holder responsible for systematizing the order must input into the Exchange’s systems at least the following specific information with respect to the order prior to the representation of the order:
(A) The option symbol;
(B) The expiration month;
(C) Buy or sell;
(D) Call or put;Incorrect
According to CBOE Rule 5.7. Entry of Orders and Quotes (f) (1) With respect to non-electronic, market and marketable orders sent to the Exchange, the Trading Permit Holder responsible for systematizing the order must input into the Exchange’s systems at least the following specific information with respect to the order prior to the representation of the order:
(A) The option symbol;
(B) The expiration month;
(C) Buy or sell;
(D) Call or put; -
Question 8 of 10
8. Question
What do you call an authority of a broker or dealer to determine for a Customer the type of option, class or series of options, the number of contracts, or whether options are to be bought or sold?
Correct
According to CBOE Rule 1.1 Definition
Discretion
The term “discretion” means the authority of a broker or dealer to determine for a Customer the type of option, class or series of options, the number of contracts, or whether options are to be bought or sold.DPM Designee.
Contract, Defendant and Deposition are not in the rule.Incorrect
According to CBOE Rule 1.1 Definition
Discretion
The term “discretion” means the authority of a broker or dealer to determine for a Customer the type of option, class or series of options, the number of contracts, or whether options are to be bought or sold.DPM Designee.
Contract, Defendant and Deposition are not in the rule. -
Question 9 of 10
9. Question
What ways you should consider when computing reportable binary options?
I. Positions in binary options on the same broad-based index that have different exercise settlement amounts shall be aggregated
II. Positions in binary options of specific minimum net equity requirements for initial approval and maintenance of customer uncovered option accounts
III. Positions in binary options shall not be aggregated with non-binary option contracts on the same or similar underlying security or broad-based index
IV. Positions in binary for approval of accounts engaged in writing uncovered short option contracts, including written approval of such accounts by a Registered Options PrincipalCorrect
According to CBOE Rule 8.43. Reports Related to Position Limits (f) Binary Options. In computing reportable binary options under this Rule 8.43:
(a) Positions in binary options on the same broad-based index that have different exercise settlement amounts shall be aggregated,
(b) positions in binary options on broad-based indexes shall not be aggregated with non-binary option contracts on an underlying stock or stocks included within such broad-based index.Incorrect
According to CBOE Rule 8.43. Reports Related to Position Limits (f) Binary Options. In computing reportable binary options under this Rule 8.43:
(a) Positions in binary options on the same broad-based index that have different exercise settlement amounts shall be aggregated,
(b) positions in binary options on broad-based indexes shall not be aggregated with non-binary option contracts on an underlying stock or stocks included within such broad-based index. -
Question 10 of 10
10. Question
Which of this Contrary Exercise Advice is a communication?
I. To the TPH organization from portfolio margin accounts, on both an intra-day and end of day basis,including the type, scope and frequency of reporting to senior management
II. To each customer, and across all customers, utilizing a portfolio margin account
III. To not exercise an option that would be automatically exercised under the Clearing Corporation’s Ex-by-Ex procedure
IV. To exercise an option that would not be automatically exercised under the Clearing Corporation’s Ex-by-Ex procedureCorrect
According to CBOE Rule 6.20. Exercise of Options Contracts (d) Contrary Exercise Advice. A Contrary Exercise Advice (“CEA”, also known as “Expiring
Exercise Declaration” or “EED”) is a communication either: (i) to not exercise an option that would be automatically exercised under the Clearing Corporation’s Ex-by-Ex procedure, or (ii) to exercise an option that would not be automatically exercised under the Clearing Corporation’s Ex-by-Ex procedure.Incorrect
According to CBOE Rule 6.20. Exercise of Options Contracts (d) Contrary Exercise Advice. A Contrary Exercise Advice (“CEA”, also known as “Expiring
Exercise Declaration” or “EED”) is a communication either: (i) to not exercise an option that would be automatically exercised under the Clearing Corporation’s Ex-by-Ex procedure, or (ii) to exercise an option that would not be automatically exercised under the Clearing Corporation’s Ex-by-Ex procedure.