Series 7 Exam Question 223: Answer and Explanation

Question: 223

Prior to buying or selling options, a customer must first receive a(n)

• A. ODD
• B. OCC
• C. margin agreement
• D. OPRA

Correct Answer: A

Explanation:

A. Because of the additional risk involved when investing in options, such as the ability to lose all money invested or facing unlimited maximum loss, all investors must receive an ODD (Options risk Disclosure Document) prior to the first transaction. The ODD is not an advertisement; it contains the pitfalls of investing in options. After the customer receives the ODD, the ROP (Registered Options Principal) has to approve the account. Next, you can do the trade, and after that, the customer has to sign and return an OAA (Options Account Agreement) within 15 days after the account has been approved for options trading.