Introduction

The series 9 exam is administered by FINRA and is required in addition to the series 10 exam to qualify a person as a General Securities Sales Supervisor. It is recommended that candidates spend at least 40 hours preparing for the exam . The series 9 material has been provided by The Securities Institute to help Investopedia visitors prepare for the exam. In order to successfully complete the exam it is recommended that you read the following material in addition to reading a full textbook and doing as many practice exams as you can

An option is a contract between two parties that determines the time and price at which a stock may be bought or sold. The two parties tothe contract are the buyer and the seller. The buyer of the option pays money, known as the option’s premium, to the seller. For this premium,the buyer obtains a right to buy or sell the stock depending on what type of option is involved in the transaction. Because the seller has received the premium from the buyer, the seller now has an obligation to perform under that contract. Depending on the option involved, the seller may have an obligation to buy or sell the stock.

OPTION CLASSIFICATION

Options are classified as to their type, class, and series. Th ere are two types of options: calls and puts.

OPTION TYPES

CALL OPTIONS A call option gives the buyer the right to buy, or to “call,” the stock from the option seller at a specific price for a certain period of time. Th e sale of a call option obligates the seller to deliver or sell that stock to the buyer at that specific price for a certain period of time.

PUT OPTIONS A put option gives the buyer the right to sell, or to “put,” the stock to the seller at a specific price for a certain period of time. Th e sale of a put option obligates the seller to buy the stock from the buyer at that specific price for a certain period of time.

OPTION CLASSES

An option class consists of all options of the same type for the same underlyingstock.EXAMPLE All XYZ calls are one class of options, and all XYZ puts are another class of options.

OPTION SERIES

An option series is the most specific classification of options and consists only of options of the same class with the same exercise price and expiration month. For example, all XYZ June 50 calls would be one series of options, and all XYZ June 55 calls would be another series of options.

MANAGING AN OPTION POSITION

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