What is a 'Series 4'

The Series 4 is an exam and securities license entitling the holder to supervise options sales personnel and compliance issues. It covers topics such as options strategies, foreign exchange options and taxation. Before taking the Series 4 Exam, a candidate must have a Series 7 license.

Breaking Down 'Series 4'

The Series 4 Exam, also known as the Registered Options Principal Qualification Examination (OP), is administered by the Financial Industry Regulatory Authority (FINRA). It "assesses the competency of an entry-level options principal candidate to perform his or her job as a registered options principal," according to FINRA. More pertinently, it focuses on "the rules and statutory provisions applicable to the supervisory management of a firm’s options personnel, accounts and trading, as well as exchange rules and regulations applicable to the trading of options contracts."

Covered supervisory activities under the Series 4 include market making, underwriting, regulatory compliance over trading, and advertising of:

  • Equity options
  • Foreign currency options
  • Interest rate options
  • Index options
  • Options on government and mortgage-backed securities

Series 4 Exam Structure and Content

The Series 4 Exam consists of 135 multiple-choice questions (10 of which are unscored and randomly distributed throughout the test) in six content areas:

  • Job Function 1: Supervise the Opening of New Accounts (21 questions)
  • Job Function 2: Supervise Options Account Activities (25 questions)
  • Job Function 3: Supervise General Options Trading (30 questions)
  • Job Function 4: Supervise Options Communications (9 questions)
  • Job Function 5: Implement Practices and Adhere to Regulatory Requirements (12 questions)
  • Job Function 6: Supervise Associated Persons and Personnel Management Activities (28 questions)

Series 4 candidates have three hours and 15 minutes to complete the test. A score of 72% is required to pass. There is no penalty for guessing so a candidate should answer every question. For more information on the test, see FINRA's Registered Options Principal Qualification Examination (OP) Series 4 Content Outline.

Series 4 Taking the Exam

The Series 4 Exam is conducted by computer. A tutorial on how to take the exam by computer provided before the exam. Candidates aren't allowed any reference material, but are given scratch paper and basic electronic calculators (some of the exam's questions may involve calculations).

Series 4 Sample Questions

These examples, provided by FINRA, represent common question types and subject matter. An asterisk denotes the correct answer.

Example 1: With a broad-based index at 266, a customer writes 1 Feb 270 index call at 2.75, writes 1 Feb 260 put at 2.25, buys 1 Feb 275 call at 1.25 and buys 1 Feb 255 put at 1. What is the maximum potential profit in this position?

(A) $225

(B) $275*

(C) $500

(D) $725

Example 2: A put is considered out-of-the-money when the market price of the underlying security is:

(A) equal to or higher than the strike price.*

(B) lower than the strike price.

(C) lower than the strike price less the premium.

(D) higher than the strike price less the premium.

Example 3: Listed equity options would not be adjusted for which of the following actions in the underlying security?

(A) A 2-for-1 stock split

(B) A 1-for-5 reverse stock split

(C) A stock dividend of 5%

(D) A cash dividend of $0.50*

RELATED TERMS
  1. Series 7

    A general securities registered representative license administered ...
  2. Registered Principal

    A registered principal is a licensed securities dealer who is ...
  3. Series 26

    The Series 26 is a securities exam and license entitling the ...
  4. Series 9/10

    Series 9/10 is a two-part securities exam and license entitling ...
  5. Series 66

    An exam administered by the Financial Industry Regulatory Authority ...
  6. Series 63

    A securities license entitling the holder to solicit orders for ...
Related Articles
  1. Personal Finance

    The Series 79 Exam: What It Is And When You Need It

    If you're getting into the field of investment banking, you'll need to know all about the Series 79.
  2. Financial Advisor

    Tips For Passing The Series 6 Exam

    Find out what you can do during the test to make sure you get a passing score.
  3. Financial Advisor

    Breaking Down Financial Securities Licenses

    Find out which exam you need to begin your career as an investment professional.
  4. Financial Advisor

    How Hard are the CFA Exams?

    Learn about the difficulty of the CFA exams with a description of the tests, some statistics on pass rates and suggestions that can help you pass the exams.
  5. Personal Finance

    Prepare For Your CFA Exams

    Find out how to get yourself ready for these lengthy and often daunting exams.
  6. Financial Advisor

    6 Proven Tips For Series 6 Success

    These techniques can help you pass this test without the added stress.
  7. Financial Advisor

    Succeeding At The Series 63 Exam

    Your career as a securities agent begins with this test. We'll show you how to score high.
  8. Financial Advisor

    Pass Your CFA Exams on the First Try

    Become one of the elite who pass the Chartered Financial Analyst exams on the first try by using these simple study methods.
  9. Personal Finance

    What to Expect on the CFA Level I Exam

    The Level I exam for the Chartered Financial Analyst designation can be challenging. Here's what to expect.
  10. Financial Advisor

    What The Series 24 Exam Won't Teach You

    Can you handle being the judge and jury in your firm? Find out what surprising tasks a job as a principal entails.
RELATED FAQS
  1. The FINRA Series 6 and Series 7 exams: The differences

    Learn about the regulatory exams needed to become a registered representative and the main differences between the Financial ... Read Answer >>
  2. What does passing the Series 6 enable me to do?

    Learn more about the Series 6, what the examination and license are and what the license enables an individual to buy, sell ... Read Answer >>
  3. Do I have to be a U.S. citizen to sit for the Series 63 exam?

    Learn more about the citizenship requirements for the Series 63 exam, what the exam material covers and what a passing score ... Read Answer >>
Hot Definitions
  1. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  2. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  3. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  4. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  5. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
  6. Price Elasticity of Demand

    Price elasticity of demand is a measure of the change in the quantity demanded or purchased of a product in relation to its ...
Trading Center