Registered Options Principal Exam
The Series 4 exam qualifies individuals to supervise options sales activities at a FINRA member firm. It covers the supervisory responsibilities of an options principal, including account approval, suitability determinations, options communications, order handling, and compliance with OCC and exchange rules. Candidates must have passed the SIE and Series 7 exams, and must be sponsored by a FINRA member firm.
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Practice Questions
Test your knowledge with these Series 4-style questions. Click an answer to check if you are correct.
1. When must the Options Disclosure Document (ODD) be delivered to a customer?
Correct: B. The ODD must be delivered at or before the time the account is approved for options trading. This ensures the customer understands the characteristics and risks of options before any trading begins.
2. Which positions are on the same side of the market for position limit purposes?
Correct: B. Long calls and short puts are both bullish positions and are aggregated on the same side of the market. Similarly, long puts and short calls are both bearish and on the same side. Position limits apply to the total contracts on one side of the market.
3. A customer wants to write uncovered index call options. What is the minimum account approval level typically required?
Correct: D. Uncovered (naked) writing carries the highest risk and requires the highest approval level. The ROP must determine that the customer has sufficient experience, financial resources, and understanding of the risks before approving uncovered writing privileges.
4. How does the OCC assign exercises to member firms?
Correct: A. The OCC assigns exercises randomly among member firms with open short positions. Individual firms then allocate assignments among their customers using either a random or first-in-first-out method, as established in their written supervisory procedures.
5. Broad-based index options typically settle in what manner?
Correct: B. Broad-based index options settle in cash because it would be impractical to deliver all the component stocks of an index. When exercised, the holder receives the difference between the exercise settlement value and the strike price, multiplied by the contract multiplier (typically $100).
Related Exams
These exams are commonly pursued alongside or in addition to the Series 4.
General Securities Representative
A prerequisite for the Series 4. The Series 7 qualifies you to sell a broad range of securities products including stocks, bonds, options, and packaged products.
General Securities Sales Supervisor
A broader supervisory qualification that includes options supervision plus general sales, compliance, and trading oversight responsibilities.