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 27

    The Series 27 is a securities license entitling the holder to ...
  2. Series 55

    The Series 55 is an exam and license that entitles the holder ...
  3. Series 24

    A securities license entitling the holder to supervise and manage ...
  4. Series 9/10

    Series 9/10 is a two-part securities exam and license entitling ...
  5. Series 42

    An exam offered by the Financial Industry Regulatory Authority ...
  6. Series 72

    The Series 72 is a FINRA licensing exam for individuals who want ...
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

    Introduction to the Series 65 exam

    The Series 65 is required in many states in order to be a fee-based advisor. Find out what it is and whether you need it.
  4. Financial Advisor

    Series 63, Series 65 Or Series 66?

    When joining the world of investment professionals, you must take the right exams.
  5. Personal Finance

    CFA Vs. Series 7: Which is Easier

    Find out which is exam is easier: The Chartered Financial Analyst (CFA) exam, or the Series 7 securities exam for registered representatives.
  6. Personal Finance

    How to Ace the CFA Level I Exam

    Prepare to ace the CFA Level 1 exam by studying systematically.
  7. Financial Advisor

    Series 24 Exam Prep: Stock Exchanges

    Before you take the series 24, you need to understand exchanges, listing requirements and much more.
  8. Personal Finance

    What To Do If You Failed Your CFA Exam

    Follow these steps to increase your odds of passing your next CFA exam.
  9. 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.
  10. Personal Finance

    Becoming A Chartered Market Technician

    The CMT certification involves three tough exams. Find out what you need to do in order to pass.
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 are my options if I fail my Series 63 exam?

    Find out what options are available to a person who has failed the Series 63 exam, a test that many states require for licensing ... Read Answer >>
  3. How many people fail the series 63 exam every year?

    How many stock brokers failed the Series 63 exam before they passed successfully? Here is what you need to know before taking ... Read Answer >>
  4. How much time can I expect to spend on studying for the Series 63 exam?

    Find out more information about the Series 63 exam policies. Learn how to study for the exam and where to obtain relevant ... Read Answer >>
  5. Can an Option Have a Negative Strike Price?

    When it comes to exchange traded options, an option can't have a negative strike price. Read Answer >>
Hot Definitions
  1. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  2. 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 ...
  3. 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 ...
  4. 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.
  5. Profit and Loss Statement (P&L)

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

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
Trading Center