SIE practice questioneasyOptions - Manipulation
A broker-dealer purchases shares of a stock in the open market and simultaneously recommends clients buy calls on the same stock to drive up its price. This activity is known as:
- AMarket manipulation✓ Correct answer
- BHedging
- CMarket making
- DOpening a straddle
Explanation
Why A — Market manipulation
Coordinated actions to artificially boost security prices constitute market manipulation, which is prohibited. Hedging, market making, and straddles are legitimate trading strategies, not illegal manipulation.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Options questions
- A registered representative sells out-of-the-money call options on a company after overhearing executives discuss a…
- A representative recommends frequent buying and selling of options to generate commission revenue, regardless of client…
- A registered representative spreads false rumors to clients to induce trading. This practice is:
- If a put option is 'at the money,' what is its intrinsic value?
- A broker tells a client that an out-of-the-money option has significant intrinsic value to encourage a purchase. This…
- A call option has an exercise price of $50, and the underlying stock is trading at $54. What is the intrinsic value of…
- A rep encourages a client to purchase uncovered options beyond the client’s stated risk tolerance and financial…
- Which of the following is a prohibited options practice?