Series 42


DEFINITION of 'Series 42'

An exam offered by the Financial Industry Regulatory Authority (FINRA) for financial professionals seeking to become licensed options representatives for a FINRA-member broker/dealer or principal.

The test consists of 50 questions taken over 1.5 hours, and a score of 70% or better is required for passing. Test questions cover the taker's knowledge of options terminology, trading strategies, handling of customer accounts, settlement practices, record-keeping, and overall broker conduct. The Series 42 has a corequisite of either the Series 62 or the Series 72 license.


Unlike some of the other exams that test broader sets of knowledge, the Series 42 is all about options, specifically listed options that trade on national exchanges like the Chicago Board Options Exchange (CBOE). Derivative contracts like stock options come with their own lexicon, which is completely different than that found in stock or bond trading. People seeking to become licensed options principals and supervise other registered representatives or a branch office must take and pass the Series 4, which has the Series 7 exam as a prerequisite.

  1. Broker-Dealer

    A person or firm in the business of buying and selling securities, ...
  2. Chicago Board Options Exchange ...

    Founded in 1973, the CBOE is an exchange that focuses on options ...
  3. Series 7

    A general securities registered representative license administered ...
  4. Series 4

    A securities license entitling the holder to supervise options ...
  5. Financial Industry Regulatory Authority ...

    A regulatory body created after the merger of the National Association ...
  6. Optionable Stock

    A stock that has options trading on a market exchange. Not all ...
Related Articles
  1. Options & Futures

    Using LEAPS With Collars

    This options strategy will help you lock in profit while keeping your upside potential.
  2. Options & Futures

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.
  3. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  4. Options & Futures

    An Option Strategy for Trading Market Bottoms

    The reverse calendar spreads offers a low-risk trading setup that has profit potential in both directions.
  5. Options & Futures

    Stock Option Expiration Cycles

    Understanding expiration cycles is just one more way to help you increase your success rate when trading options.
  6. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  7. Options & Futures

    Pick 401(k) Assets Like A Pro

    Professionals choose the options available to you in your plan, making your decisions easier.
  8. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  9. Investing News

    Tuesday Intel: More Volatility Ahead

    Yesterday started the week with a dose of fear as the VIX shot up by almost 17 percent. The index has been consistently trending higher almost doubling its current value in late August.
  10. Personal Finance

    Insider's Guide To The Top U.S. Business Schools

    The best business school for you depends on your skills, career goals and interests. We help future MBA's make a more informed choice.
  1. Is a financial advisor required to have a degree?

    Financial advisors are not required to have university degrees. However, they are required to pass certain exams administered ... Read Full Answer >>
  2. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  3. Can I use my IRA to pay for my college loans?

    If you are older than 59.5 and have been contributing to your IRA for more than five years, you may withdraw funds to pay ... Read Full Answer >>
  4. Can I use my 401(k) to pay for my college loans?

    If you are over 59.5, or separate from your plan-sponsoring employer after age 55, you are free to use your 401(k) to pay ... Read Full Answer >>
  5. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  6. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!