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16 Cards in this Set
- Front
- Back
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A client redeems shares of a mutual fund. When must the client receive payment for the redemption?
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Federal regulation requires that an individual receive payment for the redemption of a mutual fund within seven days
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Rule 144
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Rule 144 states the insider can sell an amount equal to the average weekly volume of the previous four weeks or 1% of the outstanding shares, whichever is greater.
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Hedge a Portfolio
For Stock? For Bonds? |
The use of a security (e.g., an option) to reduce the market risk of a current holding. The hedging security (the option) is expected to perform well under market conditions in which the other security would perform poorly.
For Stock: Narrow-based index options, A portfolio containing only computer stocks represents just one segment of the market. A narrow-based index also contains stocks from only one segment of the market. For Bonds: Interest-rate puts (which are price-based options) would gain value when interest rates rise and would be a reasonable choice. Yield-based calls (which are yield-based options) would increase in value when interest rates rise, also creating a viable hedge |
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Where are the spot prices of foreign currencies determined?
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Interbank Market- The unregulated international trading of foreign currencies between banks that establishes foreign exchange rates.
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SIPC is....
What does the trustee do? |
The trustee:
Notifying the firm's customers that the firm is in the process of being liquidated Distribution of securities owned by customers that are held by the firm Seeing that the distribution of cash and securities are administered in an orderly manner |
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FINRA
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The Financial Industry Regulatory Authority was created in 2007 through the consolidation of the NASD and NYSE regulatory units. This self-regulatory organization is the primary regulator for all U.S. broker-dealers.
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COVERED CALLS - long stock, short call
Breakeven Points |
Profit: Premium + difference between LONG stock price and strike price
MAX Loss: Unlimited loss potential on the short call BE: If you write or sell the option then you subtract the premium from the price of the LONG stock |
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Original Issue Discount
Accretion Straight-Line Constant Yield Method |
OID: A bond that is initially offered in the market at a discount (below par). The bond's value must be in- creased (accreted) over its life from the original discounted price up to par.
Accretion: A method of adjusting a taxpayer's cost basis of a bond bought at an original issue discount. The annual accretion is treated as interest for tax purposes. When the basis of a discount bond is adjusted upward over time, the process is called accretion Straight Line: A method of calculating depreciation or amortization that results in a uniform expense spread evenly over the life of the asset (vs. Accelerated Depreciation). Constant Yield Method: A method used for tax purposes to accrete the cost of a bond purchased at an original issue discount. |
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Bid Price
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When someone sells shares they get the bid price or Net Asset Value.
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Mutual Fund
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A type of investment company that pools investors' money and then invests in a diversified portfolio of securities. Shares are then offered for sale that are redeemable on demand by the fund at the current net asset value. All shareholders participate in the gains or losses of the fund.
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No-Load Fund
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A mutual fund that has not front-end or back-end sales charge. The net asset value (bid price) and offering price (asked price) of a no-load fund is the same. There is no sales charge.
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Offer Price
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Includes the sales charge: The amount of the purchase price of mutual fund shares that the underwriter will receive and will therefore not be invested in shares.
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Straddle
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An option position in which the investor purchases or sells a call option and a put option on the same underlying stock. The expiration month and exercise price of each contract must be the same.
Short Straddle is the riskiest! |
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Spread
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The purchase and sale of puts or calls on the same underlying security with different expirations and/or strike prices.
Spread positions limit the potential loss to the investor. For debit spreads (bullish call spreads and bearish put spreads), the loss is limited to the difference between the premiums. For credit spreads (bearish call spreads and bullish put spreads), the loss is limited to the difference between the strike prices minus the credit. |
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Put Option
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MAX Loss: Premium, the owner of a put option is only at risk for the premium paid to purchase the option.
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Fed Funds Rate
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The federal funds rate is the rate that one bank would charge another bank for overnight borrowing.
It goes up: Tightening credit, harder to get loans It goes down: Easy money, easy to get loans |
