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16 Cards in this Set

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What are initial and maintenance margins for stock positions in a short margin account?


50/50


50/25


50/30


25/30


50/30. Initial margin for a short margin account is set by Reg. T at 50%. Maintenance margin is set by FINRA at 30%.

In a margin account, a customer buys an ABC 60 Call @ $10 that has 5 months to expiration. The deposit is:


$500


$750


$1000


$6000

$1000. LEAPS with under 9 months to expiration require a 100% margin deposit to buy, the same as for regular options - 100% of $1,000 = $1,000.
If a long foreign currency option contract that has appreciated is held from one tax year into the next tax year:

any gain is 60% taxable as long term capital gain/40% taxable as short term capital at year end. All option contracts (with the exception of stock options) are subject to a special year end tax treatment. Any gain on an appreciated position is taxable at year end as 60% long term capital gain / 40% short term capital gain.

A customer buys 1 ABC Jan 60 LEAP Call @ $8 that has 24 months left until expiration in a margin account. Regulation T requires that the customer deposit:


$400


$600


$800


$6000




$600. The initial margin to buy a LEAP option with over 9 months to expiration is 75%. 75% of $800 = $600 deposit.

Copies of customer account records must be maintained in the:


I. Branch Office


II. Designated Registered Options Principal's Office


III. Headquarters Office


I, II. Copies of customer account records must be kept in the branch office and in the designated supervisory ROP's office (the last 6 months' activity records and account data). This makes sense, since the designated ROP has supervisory responsibility over the conduct of customer accounts. There is no requirement to maintain a copy of these records in the firm's headquarters office.
Customer background information should be kept in which of the following locations?I Registered Representative OfficeII Branch OfficeIII Office of Supervisory Jurisdiction
I, II, III. Exchange rules require that customer new account information be kept in both the branch office and the central Office of Supervisory Jurisdiction. In the branch, the registered representative would keep a copy of the new account information, and the principal would have his own file of all new account cards for all representatives.

Which of the following signatures appear on the New Account Form?


I Customer


II Registered Representative


III Manager or Principal

II, III.

The margin requirement to buy a LEAP option with over 9 months to expiration is:


25%


50%


75%


100%


75%

A customer buys 100 shares of ABC stock at 60 and buys 1 ABC Jan 60 Put @ $5 on the same day. For tax purposes, the cost basis of the stock position is:


$5 per share


$55 per share


$60 per share


$65 per share


$65 per share. Since the stock and the put were purchased on the same day, the put is "married" to the stock and does not influence the holding period. (There was no intent to lock in an existing short term gain and stretch it to long term). In this case, the price of the put is added to the price of the stock. The stock's cost basis becomes $60 + $5 = $65.

A customer buys 100 shares of ABC stock in a cash account at 50 and sells 1 ABC Jan 50 Call @ $5. The customer must deposit:


$500


$2500


$4500


$5000


$4500. To buy the stock, the customer must deposit 100% of the purchase price of $5,000 in a cash account. There is no margin requirement on the short call because it is covered by the stock position. Since $500 of premiums is credited to the account from selling the call, the customer must deposit $4,500 ($5,000 - $500).

A customer buys 100 shares of ABC stock at $30 as an initial transaction in a margin account. The customer must deposit:


$750


$1500


$2000


$3000

$2000. Reg. T initial margin to buy stock is 50% of $3000 = $1,500. However, since this is a new account, it must meet the minimum margin of $2,000. Therefore, $2,000 must be deposited.

A customer wishes to sell 1 ABC Jan 50 Call @ $7 and buy 1 ABC Jan 60 Call @ $3 when the market price of ABC is $51. The customer must deposit:


$400


$500


$600


$1000




$600. The customer receives $400 in premiums for exposing himself to a potential 10 point ($1000) loss on the options (obligated to sell at 50 under the short call; can buy at 60 with the long call). The potential loss must be deposited which is $1000 - $400 collected = $600.


The person responsible for the supervision of options accounts is the:

Designated Registered Options Principal
What are the initial and minimum maintenance margin percentages for short narrow based index option contracts?

20/10. The initial margin to sell a narrow based index option is 20% of market value; while the minimum maintenance margin is 10% of market value.


What are the initial and minimum maintenance margin percentages for short broad based index option contracts?




15/10. The initial margin percentage to sell broad based index options is 15%. The minimum maintenance margin percentage is 10%.