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.
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