Series 42

AAA

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.

RELATED TERMS
  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. Optionable Stock

    A stock that has options trading on a market exchange. Not all ...
  6. Financial Industry Regulatory Authority ...

    A regulatory body created after the merger of the National Association ...
RELATED FAQS
  1. What does it mean to roll a derivative contract?

    A derivative is a financial instrument in which the price of the derivative is dependent on an underlying asset. A derivative ... Read Full Answer >>
  2. How can derivatives be used for risk management?

    Derivatives could be used in risk management by hedging a position to protect against the risk of an adverse move in an asset. ... Read Full Answer >>
  3. How can I profit from monitoring open interest?

    Since markets experience asymmetric information between parties, monitor whether there is an imbalance between the open interest ... Read Full Answer >>
  4. Why would a company issue a rights offering?

    Companies most commonly issue a rights offering to raise additional capital. A company may need extra capital to meet its ... Read Full Answer >>
  5. What is the difference between share purchase rights and options?

    There is a big difference between share purchase rights and options. With share purchase rights, the holder may or may not ... Read Full Answer >>
  6. What is the difference between an option-adjusted spread and a Z-spread in reference ...

    Unlike the Z-spread calculation, the option-adjusted spread takes into account how the embedded option in a bond can change ... Read Full Answer >>
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. Professionals

    Top Strategies on How to Become a Stock Broker

    Gunning to be a stock broker and want an edge? Here's some veteran advice.
  7. Investing

    What More Volatility Means For Momentum Stocks

    One byproduct of the recent tick higher in bond yields: a meaningful rise in volatility for both stocks and bonds.
  8. Options & Futures

    How & Why Interest Rates Affect Options

    The Fed is expected to change interest rates soon. We explain how a change in interest rates impacts option valuations.
  9. Trading Systems & Software

    Steps to Starting Up an Independent Broker Dealer

    Launching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
  10. Investing Basics

    Understanding Notional Value

    This term is commonly used in the options, futures and currency markets because a very small amount of invested money can control a large position.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center