Assistance with Knowledge Quiz

[SueBab]

Good Morning
I am assisting a friend with the setting up of a Level 2 CommSec account and they are required to complete the Knowledge Quiz. I have been trading with CommSec for a number of years but not on this level so my knowledge is a little rusty.
Can you advise if I can post a couple of questions from the Quiz I'm struggling with to see if someone can provide some clarification and guidance of where to look so that I can ensure that the person I am mentoring completely understands the concept as well before they commence trading. I am not seeking answers to the quiz but just someone to advise if I need to look at the question again.
Thanks in advance and look forward to connecting with someone that can provide me with some guidance.

 

[greggles]

Hi Sue, welcome to Aussie Stock Forums.

I don't think there would be any problem with you posting the questions from the Knowledge Quiz.

It is very likely that someone here will be able to assist you.

 

[willoneau]

Hi Sue , what is level 2?

 

[Gringotts Bank]

Unusual thread.

 

[willoneau]

Hi Gringotts Banks , i remember having to answer some questions to be able to do conditional orders so am wondering if that has something to do with it.

 

[qldfrog]

From memory, had to do similar to deal with options/warrants
The idea is to avoiding people with absolutely no clue to play with tools which can hurt them severely.
The tests were not hard at the time
In my opinion, if you need help to pass, you should not try and instead self educate..you have much to loose and frankly, even after passing, i was such a liability to myself it is not funny
I do not like nanny state but in that case it is probably justified and it does not take long

 

[willoneau]

It also becomes a worry if the mentor is the one asking the questions.

 

[SueBab]

We have managed to complete the quiz, but it is 100% pass mark so we are obviously getting a question wrong so below I have posted the questions that I am not sure of and our responses - not asking for anyone to answer the questions but indicate if they agree with responses or if we need to look at a particular question again.
I am confident in 10 of the questions so won't post them but just a couple of others.
1. What will happen if a stock you have lodged is removed from the eligible security list?
(a) Your stock will stay lodged but you won't be able to lodge more of that stock
(b) You will have to find an alternative collateral to cover your option position(s) or close your position(s)
(c) This will have no impact on you
(d) Your broker will pay your margin for you
Answer - b

2.Please tick the correct pay-off diagram which accurately shows the break-even point, maximum profit and maximum loss for the following scenario:
Company XYZ is trading at $10.00. You sell 1 x $10.00 XYZ Call for a premium of $0.50.

Answer a - I've attached the diagram

3.Please tick the correct pay off diagram which accurately shows the break-even point, maximum profit and maximum loss for the following scenario:
Company XYZ is trading at $10.00. You sell 1 x $10.00 XYZ Put for a premium of $0.50
Answer - c - I've attached the diagram

Thanks for all of your assistance - as I say just asking if I've got these right (not asking for answers if they are wrong) and more than happy to do more research if they are wrong.

 

[cynic]

"
2.Please tick the correct pay-off diagram which accurately shows the break-even point, maximum profit and maximum loss for the following scenario:
Company XYZ is trading at $10.00. You sell 1 x $10.00 XYZ Call for a premium of $0.50.

Answer a - I've attached the diagram"

The answer to this one is most definitely not a.

 

[willoneau]

2.Please tick the correct pay-off diagram which accurately shows the break-even point, maximum profit and maximum loss for the following scenario:
Company XYZ is trading at $10.00. You sell 1 x $10.00 XYZ Call for a premium of $0.50.

Answer a - I've attached the diagram

Please if just starting out don't do it with options.
Selling options has minimum upside unless you are happy to buy the shares anyway and unlimited downside.

 

[SueBab]

Thanks guys for your replies - I don't trade myself in options as I said in my initial post only in shares. I was just helping a friend out and as my knowledge is limited on options - I am a Chartered Accountant so specialise in accounting rather than finance. I mentor this person in Accounting which is a completely different ball game - they asked me if I could assist as they were keen to look at shares also. I would certainly suggest that they do more research before considering options as a way of trading - I know they are enrolled in a fairly high level trading course but yes agree more study is certainly required due to the high risk.
Have a great day and thank you again, it is sincerely appreciated

 

[willoneau]

Hi SueBab, get them to come here and read some threads might be helpful, especially if their high level trading course is expensive.

 

[SueBab]

Hi SueBab, get them to come here and read some threads might be helpful, especially if their high level trading course is expensive.

Yes absolutely I will do that.
Thank you, yes it is an expensive course - above the 10K mark

 

[willoneau]

Yes absolutely I will do that.
Thank you, yes it is an expensive course - above the 10K mark

Hope they haven't started it or paid yet.?

 

[SueBab]

Hope they haven't started it or paid yet.?

Yes they have paid for it and have just started it. Think they use Interactive Brokers? as a paper account to play on whilst they are learning...
My involvement is minimal, just they asked me some questions so was just helping them out as I say with my speciality being accounting for the past 20 odd years and came across the Aussie Stock Forum so thought someone would be able to help me to understand the questions I posted.
I've asked them to go back and do some extra study when it was indicated to me that Q2 was incorrect in the answer that I posed.