Series 7 Options

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Series 7 Options
2010-11-13 14:56:56
Series Options

Series 7 Options
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  1. A customer long stock who wishes to reduce risk and generate income should:
    sell a call
  2. A taxable gain or loss on a long call option transaction would be recognized when
    the option expires and the option is sold
  3. All of the following accounts are permitted to write calls EXCEPT:
    a corporation against its own stock.
  4. What securities cannot be bought on margin and not be used as collateral?
    Put and call options
  5. If a customer is long ABC Sep 30 calls and the stock becomes subject to a trading halt on the floor of the NYSE, the customer is permitted to
    issue exercise instructions.
  6. The short leg of a bull call spread:
    limits potential gain
  7. Can a covered call be performed in a cash account?
  8. A customer sells 1 ABC Jan 50 Call @ 3 when the market price is 51. The customer is exercised when the market rises to 53. The tax consequence is
    sale proceeds of $5,300

    *When a call is exercised, the writer is selling the stock (no taxable event occurs until those shares are bought).

    The call premium received is considered to be part of the sale proceeds of the stock sale. For tax purposes, the customer is selling the stock at the strike price + call premium received (50 + 3).

    Notice that this is the same as the breakeven
  9. For tax purposes the sales proceeds of an exercised put option is
    the (strike price - premium paid) * 100
  10. Having held 100 shares of GHI stock for 15 months, a customer purchases 1 GHI Jan 50 put in December. If the put is exercised before the expiration date and the long stock is delivered, which of the following statements are TRUE?
    The premium is deducted from the sale proceeds.

    Any gain is long-term. Because the customer already held the stock long term when he purchased the put, he was not trying to stretch a short-term gain into a long-term gain. There is no effect on his established holding period of 15 months.

    Whenever a put is exercised, the stock's sale price (exercise price) is reduced by the premium paid for buying the put.
  11. What effects the holding period of a long position has been held short term?
    buying a put

    *The holding period begins a new once the put position is closed.
  12. Ratio Spread
    An options strategy in which an investor simultaneously holds an unequal number of long and short positions. A commonly used ratio is two short options for every option purchased.
  13. 1) OCC document must be provided

    2) Options account must be approved by

    3) After account is approved
    1) at or before account approval

    2) ROP/Branch manager

    3) Customer can make his first trade but options agreement must be signed and returned in 15 days

    * if not customer cannot open new positions...only closing transactions allowed
  14. Options contracts are not adjusted for cash dividends or distributions for less than
    $12.50 per options contract