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

Related Articles
  1. Trading

    Trading Options on Futures Contracts

    Futures contracts are available for all sorts of financial products, from equity indexes to precious metals. Trading options based on futures means buying call or put options based on the direction ...
  2. Trading

    Cut Down Option Risk With Covered Calls

    A good place to start with options is writing these contracts against shares you already own.
  3. Trading

    Three Ways to Profit Using Put Options

    A brief overview of how to profit from using put options in your portfolio.
  4. Trading

    Stock Options: What's Price Got To Do With It?

    A thorough understanding of risk is essential in options trading. So is knowing the factors that affect option price.
  5. Trading

    How to Trade Options on Government Bonds

    A look at trading options on debt instruments, like U.S. Treasury bonds and other government securities.
  6. Trading

    A Guide Of Option Trading Strategies For Beginners

    Options offer alternative strategies for investors to profit from trading underlying securities, provided the beginner understands the pros and cons.
Frequently Asked Questions
  1. What is the difference between yield and return?

    While both terms are often used to describe the performance of an investment, yield and return are not one and the same ...
  2. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  3. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  4. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
Trading Center