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Question 1 of 10
1. Question
Which of the following statement is/are true about exempted securities?
I. financial instruments that are registered under Bank Secrecy Act
II. financial instruments that do not need to be registered with the Securities Exchange Commission (SEC)
III. these securities are backed by the government
IV. carry a lesser risk than securities offered by public companiesCorrect
Rule no 4210. Margin Requirements
Exempt securities are financial instruments that do not need to be registered with the Securities Exchange Commission (SEC). They are generally backed by the government and may carry a lesser risk than securities offered by public companies.Exempt securities, under Section 4 of the Securities Act of 1933, are financial instruments that carry government backing and typically have a government or tax-exempt statusIncorrect
Rule no 4210. Margin Requirements
Exempt securities are financial instruments that do not need to be registered with the Securities Exchange Commission (SEC). They are generally backed by the government and may carry a lesser risk than securities offered by public companies.Exempt securities, under Section 4 of the Securities Act of 1933, are financial instruments that carry government backing and typically have a government or tax-exempt status -
Question 2 of 10
2. Question
Which of the security is not an example of exempt securities?
Correct
Rule no 4210. Margin Requirements
Exempt securities are financial instruments that do not need to be registered with the Securities Exchange Commission (SEC). They are generally backed by the government and may carry a lesser risk than securities offered by public companies. Exempt securities, under Section 4 of the Securities Act of 1933, are financial instruments that carry government backing and typically have a government or tax-exempt status.Incorrect
Rule no 4210. Margin Requirements
Exempt securities are financial instruments that do not need to be registered with the Securities Exchange Commission (SEC). They are generally backed by the government and may carry a lesser risk than securities offered by public companies. Exempt securities, under Section 4 of the Securities Act of 1933, are financial instruments that carry government backing and typically have a government or tax-exempt status. -
Question 3 of 10
3. Question
Which of the following statement is/are true about broad index stock group?
I. Index stock group consisting of 25 or more stocks
II. Value of stocks are determined by current market prices
III. Value of the stocks is determined by current share prices
IV. Indexes are established and maintained by financial services or data companiesCorrect
Rule no 4210. Margin Requirements
The term “broad index stock group” means an index stock group of 25 or more stocks whose inclusion and relative representation in the group are determined by the inclusion and relative representation of their current market prices in a widely disseminated stock index reflecting the stock market as a whole or an inter-industry sector of the stock market.Incorrect
Rule no 4210. Margin Requirements
The term “broad index stock group” means an index stock group of 25 or more stocks whose inclusion and relative representation in the group are determined by the inclusion and relative representation of their current market prices in a widely disseminated stock index reflecting the stock market as a whole or an inter-industry sector of the stock market. -
Question 4 of 10
4. Question
Which of the following statement is/are true about exercise price?
I. The exercise price is the price at which an underlying security can be purchased or sold when trading a call or put option
II. The exercise price is the same as the strike price of an option
III. An option gets its value from the difference between the fixed exercise price and the market price of the underlying securityCorrect
Rule no 4210. Margin Requirements
The term “exercise price” in respect of an option or warrant contract means the stated price per unit at which the underlying security may be purchased (in the case of a call) or sold (in the case of a put) upon the exercise of such option contract.Incorrect
Rule no 4210. Margin Requirements
The term “exercise price” in respect of an option or warrant contract means the stated price per unit at which the underlying security may be purchased (in the case of a call) or sold (in the case of a put) upon the exercise of such option contract. -
Question 5 of 10
5. Question
What is the correct formula to calculate “exercise settlement amount”?
Correct
Rule no 4210. Margin requirements
The term “exercise settlement amount” shall mean the difference between the “aggregate exercise price” and the “aggregate current index value” (as such terms are defined in the pertinent By-Laws of The Options Clearing Corporation).Incorrect
Rule no 4210. Margin requirements
The term “exercise settlement amount” shall mean the difference between the “aggregate exercise price” and the “aggregate current index value” (as such terms are defined in the pertinent By-Laws of The Options Clearing Corporation). -
Question 6 of 10
6. Question
Which of the following statements is/are true regarding “Time Within Which Margin or “Mark to Market” Must Be Obtained”?
I. the margin should be obtained within 20 days from the date
II. the margin can be obtained later if FINRA has given additional time
III. the margin should be obtained within 15 days from the date
IV. the margin should be obtained within 25 days from the dateCorrect
Rule no 4210. Margin Requirements
The amount of margin or “mark to market” required by any provision of this Rule shall be obtained as promptly as possible and in any event within 15 business days from the date such deficiency occurred, unless FINRA has specifically granted the member additional time.Incorrect
Rule no 4210. Margin Requirements
The amount of margin or “mark to market” required by any provision of this Rule shall be obtained as promptly as possible and in any event within 15 business days from the date such deficiency occurred, unless FINRA has specifically granted the member additional time. -
Question 7 of 10
7. Question
Which of the following statements is true about pattern day trader?
I. means any customer who executes four or more day trades within five business days
II. means any customer who executes four or more day trades within ten business days
III. the customer is not considered pattern day trader if the number of day trades is 6 percent or less of total trades for the five business day period
IV. the customer is not considered pattern day trader if the number of day trades is 3 percent or less of total trades for the five business day periodCorrect
Rule no 4210. Margin Requirements
The term “pattern day trader” means any customer who executes four or more day trades within five business days. However, if the number of day trades is 6 percent or less of total trades for the five business day period, the customer will not be considered a pattern day trader and the special requirements under paragraph (f)(8)(B)(iv) of this Rule will not apply. In the event that the member at which a customer seeks to open an account or to resume day trading knows or has a reasonable basis to believe that the customer will engage in pattern day trading, then the special requirements under paragraph (f)(8)(B)(iv) of this Rule will apply.Incorrect
Rule no 4210. Margin Requirements
The term “pattern day trader” means any customer who executes four or more day trades within five business days. However, if the number of day trades is 6 percent or less of total trades for the five business day period, the customer will not be considered a pattern day trader and the special requirements under paragraph (f)(8)(B)(iv) of this Rule will not apply. In the event that the member at which a customer seeks to open an account or to resume day trading knows or has a reasonable basis to believe that the customer will engage in pattern day trading, then the special requirements under paragraph (f)(8)(B)(iv) of this Rule will apply. -
Question 8 of 10
8. Question
Which of the following statements is/are true about underlying stock basket?
I. the securities in the basket shall be unavailable to support any other option or warrant transaction in the account
II. the quantity of each stock is not proportional to its index
III. total market value of the basket is equal to the underlying index value of the index options
IV. the securities in the basket cannot be used to cover more than the number of index options or warrants represented by that value,Correct
Rule no 4210. Margin Requirements
The term “underlying stock basket” means a group of securities that includes each of the component securities of the applicable index and that meets the following conditions: (1) the quantity of each stock in the basket is proportional to its representation in the index, (2) the total market value of the basket is equal to the underlying index value of the index options or warrants to be covered, (3) the securities in the basket cannot be used to cover more than the number of index options or warrants represented by that value, and (4) the securities in the basket shall be unavailable to support any other option or warrant transaction in the account.Incorrect
Rule no 4210. Margin Requirements
The term “underlying stock basket” means a group of securities that includes each of the component securities of the applicable index and that meets the following conditions: (1) the quantity of each stock in the basket is proportional to its representation in the index, (2) the total market value of the basket is equal to the underlying index value of the index options or warrants to be covered, (3) the securities in the basket cannot be used to cover more than the number of index options or warrants represented by that value, and (4) the securities in the basket shall be unavailable to support any other option or warrant transaction in the account. -
Question 9 of 10
9. Question
Which of the following statement is/are true regarding variation settlement/margin?
I. Variation margin is paid by clearing members on a daily or intra day basis
II. It reduces the exposure created by carrying high risk positions
III. It depends on a variety of factors, including expected price movements, type of asset, and market conditions.
IV. Variation margin refers the amount of funds needed to ensure margin levels for tradingCorrect
Rule no 4210. Margin Requirements
The variation margin is a variable margin payment made by clearing members, such as a futures broker, to their respective clearing houses based on adverse price movements of the futures contracts these members hold. Variation margin is paid by clearing members on a daily or intraday basis to reduce the exposure created by carrying high risk positions. By demanding variation margin from their members, clearing houses are able to maintain a suitable level of risk which allows for the orderly payment and receipt of funds for all traders using that clearing houseIncorrect
Rule no 4210. Margin Requirements
The variation margin is a variable margin payment made by clearing members, such as a futures broker, to their respective clearing houses based on adverse price movements of the futures contracts these members hold. Variation margin is paid by clearing members on a daily or intraday basis to reduce the exposure created by carrying high risk positions. By demanding variation margin from their members, clearing houses are able to maintain a suitable level of risk which allows for the orderly payment and receipt of funds for all traders using that clearing house -
Question 10 of 10
10. Question
Which of the following statements is/are true about portfolio margin?
I. The objective of portfolio margining is to offset the risks to the lender through consolidating, or netting positions to account for a portfolio’s overall risk
II. It typically results in drastically higher margin requirements for hedged positions as compared to traditional policy rules
III. Portfolio margin refers to the modern composite-margin policy that must be maintained in a derivatives account
IV. Portfolio margin is to be measured by simulating the impact of market volatilityCorrect
Rule no 4210. Margin Requirement
As an alternative to the “strategy-based” margin requirements set forth in paragraphs (a) through (f) of this Rule, members may elect to apply the portfolio margin requirements set forth in this paragraph (g) to all margin equity securities,1 listed options, security futures products (as defined in Section 3(a)(56) of the Exchange Act), unlisted derivatives, warrants, stock index warrants, and related instruments (as defined in paragraph (g)(2)(D)), provided that the requirements of paragraph (g)(6)(B)(i) of this Rule are met.
In addition, a member, provided that it is a Futures Commission Merchant (“FCM”) and is either a clearing member of a futures clearing organization or has an affiliate that is a clearing member of a futures clearing organization, is permitted under this paragraph (g) to combine an eligible participant’s related instruments with listed index options, unlisted derivatives, options on exchange traded funds (“ETF”), stock index warrants and underlying instruments and compute a margin requirement for such combined products on a portfolio margin basis.Incorrect
Rule no 4210. Margin Requirement
As an alternative to the “strategy-based” margin requirements set forth in paragraphs (a) through (f) of this Rule, members may elect to apply the portfolio margin requirements set forth in this paragraph (g) to all margin equity securities,1 listed options, security futures products (as defined in Section 3(a)(56) of the Exchange Act), unlisted derivatives, warrants, stock index warrants, and related instruments (as defined in paragraph (g)(2)(D)), provided that the requirements of paragraph (g)(6)(B)(i) of this Rule are met.
In addition, a member, provided that it is a Futures Commission Merchant (“FCM”) and is either a clearing member of a futures clearing organization or has an affiliate that is a clearing member of a futures clearing organization, is permitted under this paragraph (g) to combine an eligible participant’s related instruments with listed index options, unlisted derivatives, options on exchange traded funds (“ETF”), stock index warrants and underlying instruments and compute a margin requirement for such combined products on a portfolio margin basis.