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. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option is purchased and the lower premium option is sold - both at the same time. The higher the debit spread, the greater the initial cash outflow the investor will incur on the transaction.
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious debt when government leaders use borrowed funds in ways that don't benefit or even oppress citizens. Some legal scholars argue that successor governments should not be held accountable for odious debt incurred by earlier regimes, but there is no consensus on how odious debt should actually be treated.
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by additional investment would not warrant the expense. A harvest strategy is employed when a line of business is considered to be a cash cow, meaning that the brand is mature and is unlikely to grow if more investment is added.
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
Trading Center