FINRA Updated SIE Exam Questions and Answers by lisa

Step by Step Explanation:

Call Option Writer: When writing (selling) a call option, the writer has the obligation to sell the underlying stock at the strike price if the buyer exercises the option.

Incorrect Options:

A & B: Only the option buyer has rights, not the writer.

D: Obligations to buy stock apply to put option writers, not call option writers.

Options Clearing Corporation (OCC) Options Education: OCC Options Education.

In a UTMA account, the minor is the legal owner of the account. The custodian (in this case, the attorney) manages the account until the minor reaches the age of majority specified by state law.

C is correct because the grandson (the minor) is the account’s legal owner.

A is incorrect because the attorney is the custodian, not the owner.

B is incorrect because the grandfather established the account but does not own it.

D is incorrect because the parent does not have ownership unless explicitly named as the custodian.

The correct answer is A, Buying the stock. A short put position means the investor has sold (written) a put option and is obligated to buy the underlying stock at the strike price if the option is exercised. The primary risk is that the stock price falls significantly, forcing the writer to purchase shares at a price above market value.

Step-by-step, the best hedge is to own the underlying stock. If the investor already owns the stock, then being assigned on the short put simply results in acquiring more shares, which can offset losses or align with their investment strategy. More importantly, owning the stock reduces the overall directional risk exposure.

Choice B (selling short the stock) would increase risk because it creates a bearish position, which is inconsistent with the bullish/neutral nature of a short put. Choice C (selling another put) increases exposure and risk rather than hedging. Choice D (buying a call) does not effectively hedge downside risk from a falling stock price.

Thus, the most appropriate hedge for a short put is to buy or own the underlying stock, making Answer A correct.

Step by Step Explanation:

Priority in Bankruptcy: Preferred stockholders have a higher claim on a company’s assets than common stockholders during liquidation. Common stockholders are residual claimants.

Dividend Priority: Preferred stockholders are entitled to fixed dividends before common stockholders receive any dividends.

Incorrect Options:

A & B: Common and preferred stocks are treated differently in bankruptcy and dividend payments.

C: Common stock dividends are subordinate to preferred stock dividends.

SEC Guidance on Stockholder Rights: SEC Stock Rights.