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FINRA Series 7
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Question 1 of 10
1. Question
Which of the following is (are) involved in Evaluation of limited partnerships?
I. The program’s economic soundness
II. The general partner’s talent, knowledge, and expertise
III. The program’s basic objectives
IV. The DPP’s start-up costsCorrect
This evaluation involves four main considerations:
(i) the program’s economic soundness(II) the general partner’s talent, knowledge, and expertise(iii) the program’s basic objectives(iv) the DPP’s start-up costsIncorrect
This evaluation involves four main considerations:
(i) the program’s economic soundness(II) the general partner’s talent, knowledge, and expertise(iii) the program’s basic objectives(iv) the DPP’s start-up costs -
Question 2 of 10
2. Question
Which of the following are options traded on an exchange, and thus are also called exchange-traded options?
Correct
Listed options are options traded on an exchange, and thus are also called exchange-traded options. Consequently, listed options are required to follow exchange rules
Incorrect
Listed options are options traded on an exchange, and thus are also called exchange-traded options. Consequently, listed options are required to follow exchange rules
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Question 3 of 10
3. Question
Which of the following options are contracts that provide the right to buy or sell an equity security, such as a stock, at a given price (the strike price), independent of the actual market price for the stock at that time?
Correct
Equity options are contracts that provide the right to buy or sell an equity security, such as a stock, at a given price (the strike price), independent of the actual market price for the stock at that time. _____________________________________________________________________________________
Incorrect
Equity options are contracts that provide the right to buy or sell an equity security, such as a stock, at a given price (the strike price), independent of the actual market price for the stock at that time. _____________________________________________________________________________________
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Question 4 of 10
4. Question
Which of the following options can be classified as either American style or European style options, with European style options (the less common style) having a smaller timeframe in which they can be exercised:
I. Index options
II. Listed options
III. Equity options
IV. Yield-based optionsCorrect
Listed options can be classified as either American style or European style options, with European style options (the less common style) having a smaller timeframe in which they can be exercised.
Incorrect
Listed options can be classified as either American style or European style options, with European style options (the less common style) having a smaller timeframe in which they can be exercised.
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Question 5 of 10
5. Question
The price at which the holder of the option can buy or sell the underlying instrument, regardless of the market price is known as:
Correct
The exercise price is the price at which the holder of the option can buy or sell the underlying instrument, regardless of the market price. (The gain or loss by the investor depends upon the difference between the exercise price and the actual price.)
Incorrect
The exercise price is the price at which the holder of the option can buy or sell the underlying instrument, regardless of the market price. (The gain or loss by the investor depends upon the difference between the exercise price and the actual price.)
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Question 6 of 10
6. Question
Which of the following statement is true for Long position for options?
Correct
A long position is a position where the trader wants the price to increase. Naturally, then, every single option contract involves one person in the long position and another in the short; someone will profit from the price growing and the other from the price dropping.
Incorrect
A long position is a position where the trader wants the price to increase. Naturally, then, every single option contract involves one person in the long position and another in the short; someone will profit from the price growing and the other from the price dropping.
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Question 7 of 10
7. Question
Which of the following statements is (are) false for short positions for options?
I. Allows investors to avoid stringing together several short-term options
II. A position where the trader wants the price to increase
III. A position where the trader wants the price to decrease
IV. Traders enter into options contract either by buying themCorrect
A short position is a position where the trader wants the price to decrease. The seller will be in ashort position. And if a trader buys a put option, he is in a short position with respect to the underlying asset, since he wants the actual price to go down, so that he can sell high and buy low.
Incorrect
A short position is a position where the trader wants the price to decrease. The seller will be in ashort position. And if a trader buys a put option, he is in a short position with respect to the underlying asset, since he wants the actual price to go down, so that he can sell high and buy low.
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Question 8 of 10
8. Question
Which of the following term defines the notices received by the writers (i.e. sellers) of options, informing the writer that the buyer has now exercised the option.
Correct
Option assignments are notices received by the writers (i.e. sellers) of options, informing the writer that the buyer has now exercised the option. Thus, if the option is a put option, then an assignment means that the writer is at that point obligated to buy shares from the option-holder at the strike price.
Incorrect
Option assignments are notices received by the writers (i.e. sellers) of options, informing the writer that the buyer has now exercised the option. Thus, if the option is a put option, then an assignment means that the writer is at that point obligated to buy shares from the option-holder at the strike price.
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Question 9 of 10
9. Question
The activation of the right contained in the option contract is known as:
Correct
Exercising an option is activating the right contained in the option contract. If a trader exercises a call option, he is at that point entitled to the underlying securities at the strike price.
Incorrect
Exercising an option is activating the right contained in the option contract. If a trader exercises a call option, he is at that point entitled to the underlying securities at the strike price.
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Question 10 of 10
10. Question
Which of the following is not true for American-style exercising?
I. Can be exercised at any time before the option has reached its expiration date
II. No restrictions on when he can exercise it besides the expiration date.
III. The only time when the option-holder may exercise the option is at the expiration date
IV. The only time when the option-holder may exercise the option is after the expiration dateCorrect
American-style exercising means that, at any time before the option has reached its expiration date, the option-holder is able to exercise it. There are not restrictions on when he can exercise it besides the expiration date.
Incorrect
American-style exercising means that, at any time before the option has reached its expiration date, the option-holder is able to exercise it. There are not restrictions on when he can exercise it besides the expiration date.