ROP FINRA SERIES 4 QUESTIONS AND ANSWERS LATEST UPDATE 2025-2026
Level 3 options additional disclosure requirement - Answers since Level 3 permits uncovered
writing, the client is subject to maximum risk exposure. As a result, he will receive an additional
document that's referred to as the Special Statement for Uncovered Writers.
Account statements for options customers stay on file for what time period? - Answers copies
of account statements for options customers must be kept at both the branch office that
supervises the account and the principal supervisory office that has jurisdiction over that branch
for the most recent six-month period
VIX options trade what time period? - Answers VIX options trades from 9:30 a.m. to 4:15 p.m.
ET (8:30 a.m. to 3:15 p.m. CT). (38850)
Under Reg SHO, a firm's Easy to Borrow (ETB) list must be updated - Answers at least every 24
hours
A "collar" consists of - Answers A collar consists of a long stock position, the purchase of a put
option with a strike price that's below the current market price of the stock, and the sale of a call
option with a strike price that's above the current market price of the stock. In other words, both
the call and the put options are out-of-the-money when the position is established. The objective
of a collar is to lock in a selling price. If the market price of the stock declines, the put option is
exercised by the investor. Alternatively, if the stock rises above the strike price of the call, the
writer may receive an assignment notice to sell the stock. (38768)
Painting the Tape consists of - Answers Painting the Tape is a technique whereby individuals
acting in concert repeatedly sell a security to one another without actually changing ownership
of the securities. This is intended to give an impression of increased trading volume. The
regulators consider this to be a type of manipulation.
Marking the Close consists of - Answers Entering large trades at the end of the day specifically
to affect the closing price is known as marking the close.
Tender offers are held open for (days) - Answers at least 20 business days from the time they're
announced to the security holders. If the person who makes the offer increases or decreases
the percentage of the class of securities being sought, the consideration being offered, or the
dealer's soliciting fee, the offer must remain open for at least 10 business days from the date
that notice of the change is given to security holders.
When must a branch manager acknowledge a complaint? (days) - Answers Under industry rules,
a member firm must acknowledge receipt of a customer complaint within 15 business days of
receipt. Thereafter, the member must respond to the complaint within a reasonable period.
(39166)
During a firm transfer which firm is responsible for notifying the OCC? - Answers Both
, Information required to be kept in customer's option file (7) - Answers Date which the ODD was
mailed, customer's financial data, dates of verification of the account info in the options
agreement, name of representative who handles the account, name of ROP who approved the
account, date of options approval, types of transactions that the account is approved for.
For representatives who violate rules of an exchange, the exchange may do which of the
following: Fine, censure, suspend, expel? - Answers The exchange has the authority to expel,
fine, suspend, and/or censure a rep who violates its rules
cash account option selling requirement - Answers A call may be written in the cash account if
it's covered by stock or by an escrow receipt from a bank. Spreads must be transacted in a
margin account. A spread may be covered for purposes of margin, but despite the fact that cash
margin may not be required, the spread must still be established in a margin account. (38804)
Credit value in Margin Account - Answers In a short margin account, the credit balance
represents the amount of the initial short sale plus the amount deposited to satisfy Regulation T.
This amount remains the same despite the fact that the short market value and equity value will
fluctuate.(21482)
Diagonal Spread - Answers If the options have different expirations and different strike prices,
the position is considered a diagonal spread.
Vertical Spread - Answers If the options have the same expiration, but different strike prices, the
position is considered a vertical, price, or dollar spread
Horizontal Spread / Calendar Spread - Answers If the options have different expirations, but the
same strike prices, the position is considered a horizontal, time, or calendar spread
Rule 144 notification to SEC is NOT required when - Answers within 3 month period allows for
the sale of 1% of the outstanding stock or the average volume of trading for the past four weeks,
whichever is higher the sale doesn't exceed 5,000 shares, the dollar amount doesn't exceed
$50,000. (39241)
A combination - Answers a buy and a put of same security, same expiration
Tender offers notification - Answers no later than 10 business days from the date that the
tender offer is made. Along with a notice of the tender offer, the subject company must also
either (a) recommend that shareholders accept or decline the tender offer, (b) express that it
has no opinion and remains neutral, or (c) is unable to take a position on the tender offer.
(39240)
Options positions can be transferred EXCEPT (time) - Answers except during the week prior to
expiration of a position in the account.
Straddle VS Combination - Answers If an investor sells a put and a call on the same underlying
Level 3 options additional disclosure requirement - Answers since Level 3 permits uncovered
writing, the client is subject to maximum risk exposure. As a result, he will receive an additional
document that's referred to as the Special Statement for Uncovered Writers.
Account statements for options customers stay on file for what time period? - Answers copies
of account statements for options customers must be kept at both the branch office that
supervises the account and the principal supervisory office that has jurisdiction over that branch
for the most recent six-month period
VIX options trade what time period? - Answers VIX options trades from 9:30 a.m. to 4:15 p.m.
ET (8:30 a.m. to 3:15 p.m. CT). (38850)
Under Reg SHO, a firm's Easy to Borrow (ETB) list must be updated - Answers at least every 24
hours
A "collar" consists of - Answers A collar consists of a long stock position, the purchase of a put
option with a strike price that's below the current market price of the stock, and the sale of a call
option with a strike price that's above the current market price of the stock. In other words, both
the call and the put options are out-of-the-money when the position is established. The objective
of a collar is to lock in a selling price. If the market price of the stock declines, the put option is
exercised by the investor. Alternatively, if the stock rises above the strike price of the call, the
writer may receive an assignment notice to sell the stock. (38768)
Painting the Tape consists of - Answers Painting the Tape is a technique whereby individuals
acting in concert repeatedly sell a security to one another without actually changing ownership
of the securities. This is intended to give an impression of increased trading volume. The
regulators consider this to be a type of manipulation.
Marking the Close consists of - Answers Entering large trades at the end of the day specifically
to affect the closing price is known as marking the close.
Tender offers are held open for (days) - Answers at least 20 business days from the time they're
announced to the security holders. If the person who makes the offer increases or decreases
the percentage of the class of securities being sought, the consideration being offered, or the
dealer's soliciting fee, the offer must remain open for at least 10 business days from the date
that notice of the change is given to security holders.
When must a branch manager acknowledge a complaint? (days) - Answers Under industry rules,
a member firm must acknowledge receipt of a customer complaint within 15 business days of
receipt. Thereafter, the member must respond to the complaint within a reasonable period.
(39166)
During a firm transfer which firm is responsible for notifying the OCC? - Answers Both
, Information required to be kept in customer's option file (7) - Answers Date which the ODD was
mailed, customer's financial data, dates of verification of the account info in the options
agreement, name of representative who handles the account, name of ROP who approved the
account, date of options approval, types of transactions that the account is approved for.
For representatives who violate rules of an exchange, the exchange may do which of the
following: Fine, censure, suspend, expel? - Answers The exchange has the authority to expel,
fine, suspend, and/or censure a rep who violates its rules
cash account option selling requirement - Answers A call may be written in the cash account if
it's covered by stock or by an escrow receipt from a bank. Spreads must be transacted in a
margin account. A spread may be covered for purposes of margin, but despite the fact that cash
margin may not be required, the spread must still be established in a margin account. (38804)
Credit value in Margin Account - Answers In a short margin account, the credit balance
represents the amount of the initial short sale plus the amount deposited to satisfy Regulation T.
This amount remains the same despite the fact that the short market value and equity value will
fluctuate.(21482)
Diagonal Spread - Answers If the options have different expirations and different strike prices,
the position is considered a diagonal spread.
Vertical Spread - Answers If the options have the same expiration, but different strike prices, the
position is considered a vertical, price, or dollar spread
Horizontal Spread / Calendar Spread - Answers If the options have different expirations, but the
same strike prices, the position is considered a horizontal, time, or calendar spread
Rule 144 notification to SEC is NOT required when - Answers within 3 month period allows for
the sale of 1% of the outstanding stock or the average volume of trading for the past four weeks,
whichever is higher the sale doesn't exceed 5,000 shares, the dollar amount doesn't exceed
$50,000. (39241)
A combination - Answers a buy and a put of same security, same expiration
Tender offers notification - Answers no later than 10 business days from the date that the
tender offer is made. Along with a notice of the tender offer, the subject company must also
either (a) recommend that shareholders accept or decline the tender offer, (b) express that it
has no opinion and remains neutral, or (c) is unable to take a position on the tender offer.
(39240)
Options positions can be transferred EXCEPT (time) - Answers except during the week prior to
expiration of a position in the account.
Straddle VS Combination - Answers If an investor sells a put and a call on the same underlying
