General Securities Sales Supervisor Series 9 Exam Questions and Answers
Question 1. Which term best matches the following description: a contract giving the holder the right, but not the obligation, to sell the
underlying interest at the strike price before or at expiration under the contract terms?
A. Opening sale
B. Iron condor
C. In-the-money call
D. Put option
Correct Answer: D. Put option
Explanation: Put option is the correct concept because it is a contract giving the holder the right, but not the obligation, to sell the underlying
interest at the strike price before or at expiration under the contract terms. The wording in the question points to the defining feature rather than
to a merely associated idea. The other choices are legitimate exam concepts, but their definitions do not match the facts stated here.
Recognizing that defining feature is the most reliable way to identify Put option.
Question 2. Which term best matches the following description: a status arising from specified events that can restrict or prevent
association with a broker-dealer unless appropriate regulatory relief is obtained?
A. Underwriting supervision
B. Watch list
C. Statutory disqualification
D. Internal investigation
Correct Answer: C. Statutory disqualification
Explanation: Statutory disqualification is the correct concept because it is a status arising from specified events that can restrict or prevent
association with a broker-dealer unless appropriate regulatory relief is obtained. The wording in the question points to the defining feature rather
than to a merely associated idea. The other choices are legitimate exam concepts, but their definitions do not match the facts stated here.
Recognizing that defining feature is the most reliable way to identify Statutory disqualification.
Question 3. An investor buys 100 shares at $70.00 and writes one call with a $85.00 strike for a premium of $3.00. What is the maximum
profit on the covered-call position at expiration, ignoring commissions and dividends?
A. $1,800
B. $300.00
C. $1,500
D. $6,700
Correct Answer: A. $1,800
Explanation: A covered call's maximum profit is reached when the stock is at or above the call strike at expiration and the shares are called
away. The stock gain is $1,500 and the premium received is $300.00, for a total maximum profit of $1,800. The premium alone understates the
profit because it ignores appreciation from the stock cost to the strike price. Once the stock rises above the strike, additional stock appreciation is
surrendered to the call holder.
Question 4. Which statement about Protective put breakeven is most accurate?
A. The Options Clearing Corporation, which issues and clears standardized listed options and stands between clearing members
B. The stock purchase price plus the put premium paid, before considering commissions and taxes
C. A long stock position combined with a long put to establish downside protection below the put strike
D. A measure of how much the underlying security's price has actually fluctuated over a historical period
Correct Answer: B. The stock purchase price plus the put premium paid, before considering commissions and taxes
Explanation: Protective put breakeven is correctly described as the stock purchase price plus the put premium paid, before considering
commissions and taxes. That description captures the core characteristic tested by this item. The remaining descriptions belong to different
concepts and would lead to a different regulatory, product, accounting, or operational analysis. On exam questions, match the term to its defining
feature before considering secondary details.
1
,Question 5. Which choice correctly distinguishes Long call from Out-of-the-money put?
A. Long call: an options position with bullish exposure, limited loss to the premium paid, and potentially substantial upside; Out-of-the-money
put: a put option whose strike price is below the current market price of the underlying
B. Long call: a put option whose strike price is below the current market price of the underlying; Out-of-the-money put: an options position with
bullish exposure, limited loss to the premium paid, and potentially substantial upside
C. Long call: an option that may be exercised only during a specified period at or near expiration; Out-of-the-money put: a put option whose
strike price is below the current market price of the underlying
D. Long call: an options position with bullish exposure, limited loss to the premium paid, and potentially substantial upside; Out-of-the-money
put: the stock purchase price minus the call premium received, before considering commissions and taxes
Correct Answer: A. Long call: an options position with bullish exposure, limited loss to the premium paid, and potentially substantial upside;
Out-of-the-money put: a put option whose strike price is below the current market price of the underlying
Explanation: Long call means an options position with bullish exposure, limited loss to the premium paid, and potentially substantial upside,
whereas Out-of-the-money put means a put option whose strike price is below the current market price of the underlying. The correct choice
keeps the two concepts separate and assigns each description to the proper term. The distractors either reverse the concepts or substitute a
feature belonging to another topic. That distinction matters because the two terms can lead to different regulatory, economic, or operational
consequences.
Question 6. Which statement about Annual compliance certification is most accurate?
A. A structured process for identifying, assessing, mitigating, or disclosing conflicts arising from products, compensation, affiliations, and
business practices
B. The duty to use reasonable diligence to obtain the most favorable terms reasonably available for a customer transaction under prevailing
circumstances
C. A documented fact-finding process used to evaluate potential misconduct, control failures, or reportable events
D. A principal-level certification process concerning the firm's processes for establishing, maintaining, reviewing, testing, and modifying
compliance policies and supervisory procedures
Correct Answer: D. A principal-level certification process concerning the firm's processes for establishing, maintaining, reviewing, testing, and
modifying compliance policies and supervisory procedures
Explanation: Annual compliance certification is correctly described as a principal-level certification process concerning the firm's processes for
establishing, maintaining, reviewing, testing, and modifying compliance policies and supervisory procedures. That description captures the core
characteristic tested by this item. The remaining descriptions belong to different concepts and would lead to a different regulatory, product,
accounting, or operational analysis. On exam questions, match the term to its defining feature before considering secondary details.
Question 7. A options sales supervisor is reviewing a situation described as follows: an option whose underlying interest is a specific
equity security and that generally uses a standardized share deliverable. Which concept is most directly involved?
A. Exercise-by-exception
B. Equity option
C. Opening purchase
D. Position limit
Correct Answer: B. Equity option
Explanation: Equity option is the best answer because it is an option whose underlying interest is a specific equity security and that generally
uses a standardized share deliverable. The scenario gives the options sales supervisor facts that point directly to that concept. The other choices
can arise in related securities situations but do not fit the specific description provided. Applying the precise definition to the facts is the best way
to resolve this type of scenario.
Question 8. Which concept-and-description pairing is correctly matched?
A. Covered put - the obligation to evaluate whether recommended options activity is appropriate in light of the customer's profile and risks
B. Call breakeven - the standardized disclosure document describing the characteristics and risks of standardized options
C. Ratio spread - an options strategy using unequal numbers of long and short contracts, which can introduce uncovered risk depending on
construction
D. Credit spread - a long stock position combined with a long put to establish downside protection below the put strike
Correct Answer: C. Ratio spread - an options strategy using unequal numbers of long and short contracts, which can introduce uncovered risk
depending on construction
Explanation: Only the pairing for Ratio spread is accurate: it is an options strategy using unequal numbers of long and short contracts, which
can introduce uncovered risk depending on construction. Each incorrect choice attaches a valid-sounding description to the wrong concept.
Because the distractors are drawn from related exam material, they can appear plausible unless both parts of the pairing are checked. Verify the
term and its defining feature together before selecting a matched pair.
2
,Question 9. Which term best matches the following description: an irrevocable custodial account in which assets are held for a minor and
managed by a custodian until the statutory termination age?
A. UGMA or UTMA custodial account
B. Regulation SHO close-out requirement
C. Insider trading
D. Customer investment profile
Correct Answer: A. UGMA or UTMA custodial account
Explanation: UGMA or UTMA custodial account is the correct concept because it is an irrevocable custodial account in which assets are held for
a minor and managed by a custodian until the statutory termination age. The wording in the question points to the defining feature rather than to
a merely associated idea. The other choices are legitimate exam concepts, but their definitions do not match the facts stated here. Recognizing
that defining feature is the most reliable way to identify UGMA or UTMA custodial account.
Question 10. A call option has a strike price of $65.00 when the underlying security is trading at $75.00. What is the option's intrinsic
value per share?
A. $65.00
B. $75.00
C. $0.00
D. $10.00
Correct Answer: D. $10.00
Explanation: A call's intrinsic value is the amount by which it is in the money and can never be less than zero. With a $65.00 strike and a $75.00
market price, the intrinsic value is $10.00 per share. Any premium above intrinsic value is time value rather than additional intrinsic value. If the
option is out of the money, intrinsic value is zero even though the option itself may still trade for a positive premium.
Question 11. Which choice correctly distinguishes Regulatory examination response from Supervisory control system?
A. Regulatory examination response: a system of controls designed to test and verify that supervisory procedures are reasonably designed
and functioning effectively; Supervisory control system: the supervised process of responding accurately and completely to information
requests from regulators and remediating identified deficiencies
B. Regulatory examination response: the firm's process for receiving notice and evaluating an associated person's external business activity
for conflicts and other risks; Supervisory control system: a system of controls designed to test and verify that supervisory procedures are
reasonably designed and functioning effectively
C. Regulatory examination response: the supervised process of responding accurately and completely to information requests from regulators
and remediating identified deficiencies; Supervisory control system: a system of controls designed to test and verify that supervisory
procedures are reasonably designed and functioning effectively
D. Regulatory examination response: the supervised process of responding accurately and completely to information requests from regulators
and remediating identified deficiencies; Supervisory control system: allocating supervisory resources according to the likelihood and
potential impact of misconduct, control weakness, or customer harm
Correct Answer: C. Regulatory examination response: the supervised process of responding accurately and completely to information requests
from regulators and remediating identified deficiencies; Supervisory control system: a system of controls designed to test and verify that
supervisory procedures are reasonably designed and functioning effectively
Explanation: Regulatory examination response means the supervised process of responding accurately and completely to information requests
from regulators and remediating identified deficiencies, whereas Supervisory control system means a system of controls designed to test and
verify that supervisory procedures are reasonably designed and functioning effectively. The correct choice keeps the two concepts separate and
assigns each description to the proper term. The distractors either reverse the concepts or substitute a feature belonging to another topic. That
distinction matters because the two terms can lead to different regulatory, economic, or operational consequences.
3
, Question 12. A candidate says Implied volatility and Put option are interchangeable. Which response most accurately corrects that
statement?
A. They are identical because both mean the volatility level reflected by an option's market price when entered into an option pricing model.
B. They are different: Implied volatility is the volatility level reflected by an option's market price when entered into an option pricing model,
while Put option is a contract giving the holder the right, but not the obligation, to sell the underlying interest at the strike price before or at
expiration under the contract terms.
C. They are different only because Implied volatility is a spread established for a net premium receipt, while Put option is a contract giving the
holder the right, but not the obligation, to sell the underlying interest at the strike price before or at expiration under the contract terms.
D. They are different only because Implied volatility is the volatility level reflected by an option's market price when entered into an option
pricing model, while Put option is a clearing process under which certain expiring in-the-money options may be exercised automatically
unless contrary instructions are submitted.
Correct Answer: B. They are different: Implied volatility is the volatility level reflected by an option's market price when entered into an option
pricing model, while Put option is a contract giving the holder the right, but not the obligation, to sell the underlying interest at the strike price
before or at expiration under the contract terms.
Explanation: Implied volatility and Put option are not interchangeable because the first is the volatility level reflected by an option's market price
when entered into an option pricing model and the second is a contract giving the holder the right, but not the obligation, to sell the underlying
interest at the strike price before or at expiration under the contract terms. The correct response identifies the defining feature of each concept
without blending them together. The other choices either treat distinct concepts as identical or assign an unrelated definition to one of them.
Comparison questions are best answered by isolating the feature that changes the legal, economic, or operational result.
Question 13. A customer purchases 300 shares at $95.00 per share in a new margin account. Assuming the standard 50% Regulation T
initial margin requirement applies and ignoring commissions, what initial deposit is required?
A. $7,125
B. $14,250
C. $8,550
D. $21,375
Correct Answer: B. $14,250
Explanation: For a standard equity purchase subject to Regulation T, the initial margin requirement is 50% of the purchase price. The
transaction value is 300 times $95.00, or $28,500, so the required deposit is $14,250. Maintenance margin percentages apply after the position
is established and should not be substituted for the initial Regulation T requirement. A firm's house requirement may be higher, but the question
states that the standard Regulation T amount applies.
Question 14. Which answer correctly matches both Bear put spread and Credit spread to their respective meanings?
A. Bear put spread -> a spread established for a net premium receipt; Credit spread -> a debit spread created by buying a higher-strike put
and selling a lower-strike put with the same expiration
B. Bear put spread -> a transaction that reduces or eliminates an existing short option position; Credit spread -> a spread established for a net
premium receipt
C. Bear put spread -> a debit spread created by buying a higher-strike put and selling a lower-strike put with the same expiration; Credit
spread -> the obligation to evaluate whether recommended options activity is appropriate in light of the customer's profile and risks
D. Bear put spread -> a debit spread created by buying a higher-strike put and selling a lower-strike put with the same expiration; Credit
spread -> a spread established for a net premium receipt
Correct Answer: D. Bear put spread -> a debit spread created by buying a higher-strike put and selling a lower-strike put with the same
expiration; Credit spread -> a spread established for a net premium receipt
Explanation: The correct match identifies Bear put spread as a debit spread created by buying a higher-strike put and selling a lower-strike put
with the same expiration and Credit spread as a spread established for a net premium receipt. Both halves of the selected option are therefore
accurate. Each distractor contains at least one mismatched definition even though the language is drawn from a related topic. When an answer
choice contains two propositions, verify each proposition independently before selecting it.
Question 15. A long margin account has securities with a market value of $47,000 and a debit balance of $22,000. What is the account's
equity?
A. $22,000
B. $69,000
C. $25,000
D. $23,500
Correct Answer: C. $25,000
Explanation: Equity in a long margin account equals the market value of the securities minus the debit balance owed to the broker-dealer.
Subtracting $22,000 from $47,000 produces equity of $25,000. The debit balance itself is the customer's loan, not the customer's ownership
interest in the account. This equity amount is then compared with applicable maintenance requirements to determine whether additional margin
is needed.
4
Question 1. Which term best matches the following description: a contract giving the holder the right, but not the obligation, to sell the
underlying interest at the strike price before or at expiration under the contract terms?
A. Opening sale
B. Iron condor
C. In-the-money call
D. Put option
Correct Answer: D. Put option
Explanation: Put option is the correct concept because it is a contract giving the holder the right, but not the obligation, to sell the underlying
interest at the strike price before or at expiration under the contract terms. The wording in the question points to the defining feature rather than
to a merely associated idea. The other choices are legitimate exam concepts, but their definitions do not match the facts stated here.
Recognizing that defining feature is the most reliable way to identify Put option.
Question 2. Which term best matches the following description: a status arising from specified events that can restrict or prevent
association with a broker-dealer unless appropriate regulatory relief is obtained?
A. Underwriting supervision
B. Watch list
C. Statutory disqualification
D. Internal investigation
Correct Answer: C. Statutory disqualification
Explanation: Statutory disqualification is the correct concept because it is a status arising from specified events that can restrict or prevent
association with a broker-dealer unless appropriate regulatory relief is obtained. The wording in the question points to the defining feature rather
than to a merely associated idea. The other choices are legitimate exam concepts, but their definitions do not match the facts stated here.
Recognizing that defining feature is the most reliable way to identify Statutory disqualification.
Question 3. An investor buys 100 shares at $70.00 and writes one call with a $85.00 strike for a premium of $3.00. What is the maximum
profit on the covered-call position at expiration, ignoring commissions and dividends?
A. $1,800
B. $300.00
C. $1,500
D. $6,700
Correct Answer: A. $1,800
Explanation: A covered call's maximum profit is reached when the stock is at or above the call strike at expiration and the shares are called
away. The stock gain is $1,500 and the premium received is $300.00, for a total maximum profit of $1,800. The premium alone understates the
profit because it ignores appreciation from the stock cost to the strike price. Once the stock rises above the strike, additional stock appreciation is
surrendered to the call holder.
Question 4. Which statement about Protective put breakeven is most accurate?
A. The Options Clearing Corporation, which issues and clears standardized listed options and stands between clearing members
B. The stock purchase price plus the put premium paid, before considering commissions and taxes
C. A long stock position combined with a long put to establish downside protection below the put strike
D. A measure of how much the underlying security's price has actually fluctuated over a historical period
Correct Answer: B. The stock purchase price plus the put premium paid, before considering commissions and taxes
Explanation: Protective put breakeven is correctly described as the stock purchase price plus the put premium paid, before considering
commissions and taxes. That description captures the core characteristic tested by this item. The remaining descriptions belong to different
concepts and would lead to a different regulatory, product, accounting, or operational analysis. On exam questions, match the term to its defining
feature before considering secondary details.
1
,Question 5. Which choice correctly distinguishes Long call from Out-of-the-money put?
A. Long call: an options position with bullish exposure, limited loss to the premium paid, and potentially substantial upside; Out-of-the-money
put: a put option whose strike price is below the current market price of the underlying
B. Long call: a put option whose strike price is below the current market price of the underlying; Out-of-the-money put: an options position with
bullish exposure, limited loss to the premium paid, and potentially substantial upside
C. Long call: an option that may be exercised only during a specified period at or near expiration; Out-of-the-money put: a put option whose
strike price is below the current market price of the underlying
D. Long call: an options position with bullish exposure, limited loss to the premium paid, and potentially substantial upside; Out-of-the-money
put: the stock purchase price minus the call premium received, before considering commissions and taxes
Correct Answer: A. Long call: an options position with bullish exposure, limited loss to the premium paid, and potentially substantial upside;
Out-of-the-money put: a put option whose strike price is below the current market price of the underlying
Explanation: Long call means an options position with bullish exposure, limited loss to the premium paid, and potentially substantial upside,
whereas Out-of-the-money put means a put option whose strike price is below the current market price of the underlying. The correct choice
keeps the two concepts separate and assigns each description to the proper term. The distractors either reverse the concepts or substitute a
feature belonging to another topic. That distinction matters because the two terms can lead to different regulatory, economic, or operational
consequences.
Question 6. Which statement about Annual compliance certification is most accurate?
A. A structured process for identifying, assessing, mitigating, or disclosing conflicts arising from products, compensation, affiliations, and
business practices
B. The duty to use reasonable diligence to obtain the most favorable terms reasonably available for a customer transaction under prevailing
circumstances
C. A documented fact-finding process used to evaluate potential misconduct, control failures, or reportable events
D. A principal-level certification process concerning the firm's processes for establishing, maintaining, reviewing, testing, and modifying
compliance policies and supervisory procedures
Correct Answer: D. A principal-level certification process concerning the firm's processes for establishing, maintaining, reviewing, testing, and
modifying compliance policies and supervisory procedures
Explanation: Annual compliance certification is correctly described as a principal-level certification process concerning the firm's processes for
establishing, maintaining, reviewing, testing, and modifying compliance policies and supervisory procedures. That description captures the core
characteristic tested by this item. The remaining descriptions belong to different concepts and would lead to a different regulatory, product,
accounting, or operational analysis. On exam questions, match the term to its defining feature before considering secondary details.
Question 7. A options sales supervisor is reviewing a situation described as follows: an option whose underlying interest is a specific
equity security and that generally uses a standardized share deliverable. Which concept is most directly involved?
A. Exercise-by-exception
B. Equity option
C. Opening purchase
D. Position limit
Correct Answer: B. Equity option
Explanation: Equity option is the best answer because it is an option whose underlying interest is a specific equity security and that generally
uses a standardized share deliverable. The scenario gives the options sales supervisor facts that point directly to that concept. The other choices
can arise in related securities situations but do not fit the specific description provided. Applying the precise definition to the facts is the best way
to resolve this type of scenario.
Question 8. Which concept-and-description pairing is correctly matched?
A. Covered put - the obligation to evaluate whether recommended options activity is appropriate in light of the customer's profile and risks
B. Call breakeven - the standardized disclosure document describing the characteristics and risks of standardized options
C. Ratio spread - an options strategy using unequal numbers of long and short contracts, which can introduce uncovered risk depending on
construction
D. Credit spread - a long stock position combined with a long put to establish downside protection below the put strike
Correct Answer: C. Ratio spread - an options strategy using unequal numbers of long and short contracts, which can introduce uncovered risk
depending on construction
Explanation: Only the pairing for Ratio spread is accurate: it is an options strategy using unequal numbers of long and short contracts, which
can introduce uncovered risk depending on construction. Each incorrect choice attaches a valid-sounding description to the wrong concept.
Because the distractors are drawn from related exam material, they can appear plausible unless both parts of the pairing are checked. Verify the
term and its defining feature together before selecting a matched pair.
2
,Question 9. Which term best matches the following description: an irrevocable custodial account in which assets are held for a minor and
managed by a custodian until the statutory termination age?
A. UGMA or UTMA custodial account
B. Regulation SHO close-out requirement
C. Insider trading
D. Customer investment profile
Correct Answer: A. UGMA or UTMA custodial account
Explanation: UGMA or UTMA custodial account is the correct concept because it is an irrevocable custodial account in which assets are held for
a minor and managed by a custodian until the statutory termination age. The wording in the question points to the defining feature rather than to
a merely associated idea. The other choices are legitimate exam concepts, but their definitions do not match the facts stated here. Recognizing
that defining feature is the most reliable way to identify UGMA or UTMA custodial account.
Question 10. A call option has a strike price of $65.00 when the underlying security is trading at $75.00. What is the option's intrinsic
value per share?
A. $65.00
B. $75.00
C. $0.00
D. $10.00
Correct Answer: D. $10.00
Explanation: A call's intrinsic value is the amount by which it is in the money and can never be less than zero. With a $65.00 strike and a $75.00
market price, the intrinsic value is $10.00 per share. Any premium above intrinsic value is time value rather than additional intrinsic value. If the
option is out of the money, intrinsic value is zero even though the option itself may still trade for a positive premium.
Question 11. Which choice correctly distinguishes Regulatory examination response from Supervisory control system?
A. Regulatory examination response: a system of controls designed to test and verify that supervisory procedures are reasonably designed
and functioning effectively; Supervisory control system: the supervised process of responding accurately and completely to information
requests from regulators and remediating identified deficiencies
B. Regulatory examination response: the firm's process for receiving notice and evaluating an associated person's external business activity
for conflicts and other risks; Supervisory control system: a system of controls designed to test and verify that supervisory procedures are
reasonably designed and functioning effectively
C. Regulatory examination response: the supervised process of responding accurately and completely to information requests from regulators
and remediating identified deficiencies; Supervisory control system: a system of controls designed to test and verify that supervisory
procedures are reasonably designed and functioning effectively
D. Regulatory examination response: the supervised process of responding accurately and completely to information requests from regulators
and remediating identified deficiencies; Supervisory control system: allocating supervisory resources according to the likelihood and
potential impact of misconduct, control weakness, or customer harm
Correct Answer: C. Regulatory examination response: the supervised process of responding accurately and completely to information requests
from regulators and remediating identified deficiencies; Supervisory control system: a system of controls designed to test and verify that
supervisory procedures are reasonably designed and functioning effectively
Explanation: Regulatory examination response means the supervised process of responding accurately and completely to information requests
from regulators and remediating identified deficiencies, whereas Supervisory control system means a system of controls designed to test and
verify that supervisory procedures are reasonably designed and functioning effectively. The correct choice keeps the two concepts separate and
assigns each description to the proper term. The distractors either reverse the concepts or substitute a feature belonging to another topic. That
distinction matters because the two terms can lead to different regulatory, economic, or operational consequences.
3
, Question 12. A candidate says Implied volatility and Put option are interchangeable. Which response most accurately corrects that
statement?
A. They are identical because both mean the volatility level reflected by an option's market price when entered into an option pricing model.
B. They are different: Implied volatility is the volatility level reflected by an option's market price when entered into an option pricing model,
while Put option is a contract giving the holder the right, but not the obligation, to sell the underlying interest at the strike price before or at
expiration under the contract terms.
C. They are different only because Implied volatility is a spread established for a net premium receipt, while Put option is a contract giving the
holder the right, but not the obligation, to sell the underlying interest at the strike price before or at expiration under the contract terms.
D. They are different only because Implied volatility is the volatility level reflected by an option's market price when entered into an option
pricing model, while Put option is a clearing process under which certain expiring in-the-money options may be exercised automatically
unless contrary instructions are submitted.
Correct Answer: B. They are different: Implied volatility is the volatility level reflected by an option's market price when entered into an option
pricing model, while Put option is a contract giving the holder the right, but not the obligation, to sell the underlying interest at the strike price
before or at expiration under the contract terms.
Explanation: Implied volatility and Put option are not interchangeable because the first is the volatility level reflected by an option's market price
when entered into an option pricing model and the second is a contract giving the holder the right, but not the obligation, to sell the underlying
interest at the strike price before or at expiration under the contract terms. The correct response identifies the defining feature of each concept
without blending them together. The other choices either treat distinct concepts as identical or assign an unrelated definition to one of them.
Comparison questions are best answered by isolating the feature that changes the legal, economic, or operational result.
Question 13. A customer purchases 300 shares at $95.00 per share in a new margin account. Assuming the standard 50% Regulation T
initial margin requirement applies and ignoring commissions, what initial deposit is required?
A. $7,125
B. $14,250
C. $8,550
D. $21,375
Correct Answer: B. $14,250
Explanation: For a standard equity purchase subject to Regulation T, the initial margin requirement is 50% of the purchase price. The
transaction value is 300 times $95.00, or $28,500, so the required deposit is $14,250. Maintenance margin percentages apply after the position
is established and should not be substituted for the initial Regulation T requirement. A firm's house requirement may be higher, but the question
states that the standard Regulation T amount applies.
Question 14. Which answer correctly matches both Bear put spread and Credit spread to their respective meanings?
A. Bear put spread -> a spread established for a net premium receipt; Credit spread -> a debit spread created by buying a higher-strike put
and selling a lower-strike put with the same expiration
B. Bear put spread -> a transaction that reduces or eliminates an existing short option position; Credit spread -> a spread established for a net
premium receipt
C. Bear put spread -> a debit spread created by buying a higher-strike put and selling a lower-strike put with the same expiration; Credit
spread -> the obligation to evaluate whether recommended options activity is appropriate in light of the customer's profile and risks
D. Bear put spread -> a debit spread created by buying a higher-strike put and selling a lower-strike put with the same expiration; Credit
spread -> a spread established for a net premium receipt
Correct Answer: D. Bear put spread -> a debit spread created by buying a higher-strike put and selling a lower-strike put with the same
expiration; Credit spread -> a spread established for a net premium receipt
Explanation: The correct match identifies Bear put spread as a debit spread created by buying a higher-strike put and selling a lower-strike put
with the same expiration and Credit spread as a spread established for a net premium receipt. Both halves of the selected option are therefore
accurate. Each distractor contains at least one mismatched definition even though the language is drawn from a related topic. When an answer
choice contains two propositions, verify each proposition independently before selecting it.
Question 15. A long margin account has securities with a market value of $47,000 and a debit balance of $22,000. What is the account's
equity?
A. $22,000
B. $69,000
C. $25,000
D. $23,500
Correct Answer: C. $25,000
Explanation: Equity in a long margin account equals the market value of the securities minus the debit balance owed to the broker-dealer.
Subtracting $22,000 from $47,000 produces equity of $25,000. The debit balance itself is the customer's loan, not the customer's ownership
interest in the account. This equity amount is then compared with applicable maintenance requirements to determine whether additional margin
is needed.
4
