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.

Investopedia explains 'Series 42'


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.



comments powered by Disqus
Hot Definitions
  1. Cash and Carry Transaction

    A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.
  2. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  3. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  4. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  5. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  6. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
Trading Center