What is the 'Series 42'

The Series 42 is an exam and license for financial professionals seeking to become licensed options representatives for a broker-dealer or principal. The exam, more formally known as the Registered Options Representative Qualification Examination (OR), was both created by and is administered by the Financial Industry Regulatory Authority (FINRA). The exam's 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 co-requisite of either the Series 62 or the Series 72 licenses. As of Oct. 1, 2018, the Series 42 will be retired as a part of a FINRA exam restructuring program.

Breaking Down 'Series 42'

According to FINRA, the Series 42 is meant to assess the competency of entry-level registered representatives acting as options representatives. 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. Covered activities and products of an options representative include the solicitation and sale of option contracts.

For more information on the rules behind the Series 42 Exam, as well as a definition of an options representative and a description of their duties, see NASD Rule 1032(d) Options Representative.

Series 42 Exam Structure and Content Outline

The Series 42 is a pure options exam that consists of 50 multiple choice questions. Test takers are given 90 minutes to complete the exam, which costs $75. A score of 70% or better is required for passing. Whiteboard/dry erase markers and basic calculators will be provided. No reference material is allowed into the testing room. For more, see FINRA's Series 42 - Registered Options Representative Exam (OR) informational page.

  • Section 1: Terminology, Types of Options, Investment Strategies and Taxation (20 questions)
  • Section 2: Handling Options Accounts (14 questions)
  • Section 3: Trading and Settlement Practices (10 questions)
  • Section 4: Qualifications and Business Conduct of Registered Options Representatives; Reporting and Recordkeeping Requirements (6 questions)

For more on the Series 42 content outline, see FINRA's Series 42 - Registered Options Representative Exam content outline, which includes an expanded listing of test topics, as well as sample questions.

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