The Series 9 and 10 exams are also known as the General Securities Sales Supervisor Qualification Exams. You must pass both of these in order to be licensed as a general securities sales supervisor. The Series 9 is 90 minutes long with 55 multiple choice questions that are focused on options. Passing the Series 7 exam is a prerequisite for taking the Series 9/10. Start your test prep right now with our free Series 9 practice exam!
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Question 1 |
How long must advertisements, market letters, and sales literature issued by a Member Firm pertaining to listed options be retained and readily available for inspection?
6 months | |
1 year | |
3 years | |
5 years |
Question 1 Explanation:
3 years is the retention of ads and sales literature.
Question 2 |
Under industry rules, all of the following elements must appear on an order ticket except:
the time an order is accepted | |
the identity of the RR of record | |
the exchange where the order is being executed | |
the identity of the person who receives the order from the client |
Question 2 Explanation:
The sales person creating/writing the Order Ticket starts the process of getting the customer’s order filled, but the sales person/registered rep cannot know at that point on what stock exchange the Order Room personnel will choose to get it executed.
Question 3 |
Which two of the following documents would be required to approve a general partnership account for covered call writing and the purchase of put and call options?
I. a copy of the partnership agreement with specific option language
II. a single option agreement completed by the authorized agent
III. a margin and loan agreement signed by the agent
IV. an individual option form completed by all the partners
I and II | |
I and IV | |
II and III | |
III and IV |
Question 3 Explanation:
An account that is opened in the name of a Partnership must be accompanied by a Partnership Agreement and the Designation of which partner will have the role of placing orders on behalf of the partnership. For trading Options products, the Partnership Agreement should allow for Options trading by the partners.
Question 4 |
How many days after option account opening must a copy of the ODD be provided to the customer?
3 business days
| |
at or prior to account approval | |
15 calendar days | |
this is to be provided to the customer upon request |
Question 4 Explanation:
The ODD is the Options Disclosure Document which must be provided at, or prior to, the opening of the account.
Question 5 |
Order the following events from first to last in the opening of a new Option account:
I. Branch Manager Approval
II. ROP Approval
III. ODD furnished to customer
IV. Special Option Account Agreement signed by customer
III, IV, I, II | |
I, III, II, IV | |
III, I, II, IV | |
II, III, IV, I |
Question 5 Explanation:
The ODD comes first; then the Branch Manager of that office will approve the account for Options; then the Registered Options Principal located in the B/D Home Office will approve the account; lastly, the special Option Agreement to be returned to the firm by the customer within 15 days after account opening is required.
Question 6 |
To complete a vertical bear spread, which of the below must be combined with a long ABC Mar 110 put @ 5 pts?
Short ABC Mar 100 put @ 1 ½ pts | |
Short ABC Mar 115 put @ 7 pts | |
Long ABC Mar 105 call @ 4 pts | |
None of the above |
Question 6 Explanation:
Break down the question into pieces: it’s a spread, but answer C cannot be a spread; vertical means the Strike Prices are different, so both answers A and B will work; lastly, the Short Put must have a strike price Lower than the Long Put, so the correct answer is A.
Question 7 |
Each morning on the floor of the CBOE, option contracts are introduced at the opening bell in what is commonly referred to as:
An open outcry | |
An order succession | |
A short/long alternating procedure | |
An opening rotation |
Question 7 Explanation:
The CBOE refers to it as a "rotation," and when it’s the beginning of the trading day, it must be the Opening Rotation.
Question 8 |
Broad-based Index Options upon exercise are settled typically according to which of the following methods?
Next day settlement in cash in an amount equal to the intrinsic value of the contract at the time of exercise | |
Next day settlement in cash in an amount equal to the intrinsic value of the contract as of the close | |
Two business day regular way settlement and with the delivery of cash equal to the intrinsic value of the contract as of the close | |
Next day settlement with the delivery of the requisite portfolio of the underlying contract |
Question 8 Explanation:
Be careful with this one: Answers A and B are very similar, but answer A says "at the time of exercise" which could be during the trading day whereas answer B says "as of the close" which is accurate.
Question 9 |
An example of an "uneconomic trade," as the term is used in the CBOE Manual of Rules, would include:
Short XYZ May 75 put at 1 with a Long XYZ May 80 put at 5 1/2 with XYZ at 72 ¼ | |
Long ZZT Aug 100 call at 10 with a Long ZZT Aug 100 put at ½ | |
Short ABC Dec 40 put at 3 with a Short ABC Dec 40 call at 3 | |
None of these |
Question 9 Explanation:
There is no way that doing a 5½ dollar premium to buy the long side of the spread and receiving only 1 dollar premium for writing the short side of the spread can possibly become economically profitable when doing a spread where the difference in strike prices is only $5 per share ($80 minus $75). The other two answers could be profitable to the client.
Question 10 |
Whereas the DMM on the floor of the NYSE maintains a fair and orderly market by acting as both broker and dealer when called for,
The Order Book Official at the CBOE may do the same with approval of the Board of Governors of the CBOE. | |
The Order Book Official at the CBOE may do the same when appropriate. | |
The Order Book Official may only function in an agency/brokerage capacity. | |
The Order Book Official may not engage in activities that are either brokerage (agency) nor that are dealer (principal) in capacity. |
Question 10 Explanation:
The Order Book Official on the floor of the CBOE may only act in the capacity of an agent, not a dealer.
Question 11 |
A margin account customer goes long 1000 shares LAR at $80 with Reg. T at 50% while shorting 10 LAR Sep 85 calls @ 3 pts. The Reg. T requirement for this transaction will be:
$40,000 | |
$37,000 | |
$43,000 | |
$77,000 |
Question 11 Explanation:
Reg. T allows the premium received from writing covered calls to offset the Reg. T down payment on the stock. The math looks like this: $80,000 times 50% = 40K. The total call premium = $300 times 10 contracts = $3,000. $40,000 minus $3,000 = $37,000.
Question 12 |
A margin account customer goes long 500 shares HML at $60 with Reg. T at 50% while shorting 5 HML Nov. 65 call at 2 pts. The customer’s deposit requirement will be:
$14,000 | |
$15,000 | |
$16,000 | |
$29,000 |
Question 12 Explanation:
Use the same approach as the prior question. Reg. T down payment on the stock minus the total call premiums. 500 shares times $60 = $30,000 times 50% = $15,000 minus $1,000 = $14,000 total due.
Question 13 |
In computing the SMA in your client's margin account, long option contracts are:
Included at their current premium | |
Included at their cost basis | |
Excluded from the computation | |
Included to the extent the contracts are intrinsic |
Question 13 Explanation:
Since having long option contracts in the margin account have no loan value whatsoever, they don’t contribute to SMA.
Question 14 |
Cabinet trading is available principally when a contract:
Is being traded on its expiration date | |
Is being liquidated at a $.01 per share premium | |
Is a method of guaranteeing a floor broker an execution for a customer order only | |
Is a method to enter limit orders for options on the floor |
Question 14 Explanation:
The term "cabinet trading" is used when the OBO on the floor of the CBOE accommodates a B/D by executing a trade with the B/D for option contracts at a premium of 1 penny per share: $1.00 for a 100-share contract.
Question 15 |
Record keeping retention of option transactions may be done by member firms in all the following ways with the exception of:
Optical storage | |
Tamper-evident electronic storage | |
Micro-fiche | |
None of the above |
Question 15 Explanation:
All of these are acceptable methods of keeping records by brokerage firms.
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