S7 Module 2 Test Questions and Answers (Options, Accts,
Retirement, New Issues)
1. Which option position is used to hedge a long stock position: long put
2. Which of the option position is used to generate additional income against a long stock
position: short call
3. What creates a Straddle: Long a call and put of same amount with same maturity
4. The sale of a call and a put on the same stock with the different strike prices and/or
different expirations is a: short combination
5. Strangle: a specific variation of a combination, where both contracts are "out the money
6. spread: the purchase and sale of either 2 calls or 2 puts with differing strike prices and/or
differing expirations
7. Long put strategies are profitable if the spread [narrows/widens]: Widens
8. Ratio Call write: a customer who is long stock sells call contracts against the stock position -
If a customer sells more call contracts than the stock position owned, this is a "ratio" call write
9. The issuer of listed options contracts is the: OCC
10. The maximum life of a regular stock option contract is: 9 months
11. Exercise limits are applied to all exercises occurring within a business day period: 5
12. Options Position Limits: Any accounts that are under " " are aggregated to
determine if there is a position limit violation.: Common Control
13. Common Control is deemed to exist for: (4): 1. owners in a joint account
2. each general partner in a partnership account
3. accounts with common directors or management
4. individual with authority to execute transactions in an account (RIA)
14. Would a husband and wife "jointly" discussing the company before placing the trades
be considered "Common Control": YES
15. If the New York Stock Exchange stops trading in a security, the exchange where the listed
option for that stock trades will: stop trading in those option classes
16. Are listed option contracts are adjusted for regular cash dividends: NO
17. Are listed option contracts are adjusted for Stock Splits (2:1, 4:1)?: YES
18. Are listed option contracts are adjusted for Special cash dividends: YES
19. Equity LEAP Option: Long-term Equity AnticiPation - an exchange-traded option which
enables investor to take advantage of long-term trends
20. Equity LEAP - American-style stock option max life: 28 months
21. Equity LEAP - European Style Index option max life: 36 months
22. Are options traded on NASDAQ?: NO
23. Who is the "order book official": exchange employee who manages the book of public orders
24. Who CANNOT buy options for his own account on an exchange floor: -
Floor Broker
25. How are trades routed on the CBOE Order support system?: directly to the trading post,
bypassing the firm's communication post