General Securities Representative (Series 7) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Series 7 Exam for General Securities Representatives. Study with comprehensive multiple-choice questions, each with detailed explanations to ensure you understand key concepts. Excel in your exam with confidence!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is a key characteristic of index option exercise?

It can occur at any time
It occurs at the close of the trading day
It is automatic
It requires a margin call

The correct answer is: It occurs at the close of the trading day

A key characteristic of index option exercise is that it occurs at the close of the trading day. This is due to the fact that index options are European-style options, meaning they can only be exercised on the expiration date, which typically coincides with the close of trading. The exercise results in a cash settlement based on the value of the index at that close, rather than the delivery of the underlying securities as seen with some equity options. This automatic settlement feature streamlines the process and allows for quicker resolution of trades related to index options. The other potential characteristics do not apply as specifically to index option exercise. For instance, while some options can be exercised any time if they are American-style options, index options adhere to European-style limitations. The concept of requiring a margin call typically pertains to margin accounts or trading in certain leveraged situations, rather than the specific mechanics of index option exercise.