Series 57 – Securities Trader Stock Practice Questions

A trader wants to hedge against a potential decline in XYZ Corp stock. What strategy would be effective?

• AA. Buy call options
• BB. Sell put options
• CC. Sell call options
• DD. Buy put options

A trader discovers that the market for ABC stock is illiquid. What is a potential risk?

• AA. Increased market share
• BB. Higher trade execution
• CC. Price manipulation
• DD. Increased commissions

A trader observes unusual volume in a stock. What could this indicate?

• AA. Potential news event
• BB. Market stability
• CC. Decreased interest
• DD. Increased liquidity

What is the effect of buying a call option on a stock?

• AA. Potential for unlimited profit
• BB. No effect
• CC. Limiting potential risk
• DD. Short selling