SIE practice questioneasyOptions - Prohibited Activities
A registered representative sells out-of-the-money call options on a company after overhearing executives discuss a major technology breakthrough that will soon be public. What is this an example of?
- ANormal options trading
- BHedging
- CCovered call writing
- DIllegal insider trading✓ Correct answer
Explanation
Why D — Illegal insider trading
Trading based on material non-public information is insider trading, regardless of profit motive. Hedging, covered calls, and routine options trades are legal when public information is used.
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