Practice exam question: Additional order specifications

Can you help me clarify the difference between IOC and FOK? The practice exam question below states the answer as Buy Limit IOC…

I understand the buy limit part…but I thought that in order for it to be an IOC, a cancellation has to be in place…but the question didn’t state any cancellations…

According to the textbook…shouldn’t the answer be Buy Limit FOK?
From the textbook…
In the same situation, an immediate or cancel (IOC) order would fill the 500 shares at $50, then cancel the rest of the order. Essentially, the customer requests an immediate purchase of as many shares at the price they specified. The brokerage firm has one try to get as many shares as they can, then cancels the rest.

Fill or kill (FOK) orders are the most stringent order specification that requires all of the shares to be filled immediately. In the same situation, the order would be cancelled with only 500 of the 1,000 shares available.

Hey Lashy,

Both FOK and IOC orders are immediate, single attempt, and both implicitly include a cancellation if their conditions are not met.

With FOK orders, it’s all or nothing. They either want all the requested shares immediately at that price, or they want the order cancelled.

With IOC orders, it’s partial fill. They want as many as they can get immediately at that price, even if it isn’t the full amount, and then cancel the rest.

The key piece of information in the question is that they “do not care if they receive all 200 shares” - so for example, receiving 100 of the 200 requested shares is an acceptable outcome. They are ok with the order being partially filled, leading us to IOC as the answer.

Thank you guys…that helps. I came across this question on another test…can you give me your input?

Janet Johnson, a registered representative and licensed insurance agent, meets in the home with a 50-year-old widower to discuss what to do with life insurance proceeds of his deceased spouse. The widower is apprehensive about liquidity. Johnson hands him a prospectus for a variable annuity and recommends the funds be conservatively invested in separate accounts within the annuity. Johnson takes time to carefully explain and illustrate a 6% gross return over a 20-year period and further explains that earnings will grow tax deferred. What did Johnson do wrong?

A) Johnson waited until the presentation to deliver the prospectus.

B) Johnson recommended a variable annuity to an individual who is looking for liquidity.*

C) The separate accounts should have been presented as mutual funds.

D) Nothing. Johnson made a careful, individualized presentation of a securities product.

The regulatory element of a representative’s continuing education will need to be completed within 120 days of certain anniversaries of their licensing. Which of the following is not an anniversary where a representative would be required to complete the regulatory element of their continuing education?

A) 3rd anniversary

B) 2nd anniversary

C) 5th anniversary

D) 11th anniversary

Juan owns 1,000 shares of the big box retailer Buystuff, Inc. (Ticker: BSTF). He has owned the shares for 10 years and they have appreciated nicely. If Juan desires to generate income from the BSTF position, he could do which of the following?

A) Sell 10 BSTF calls*

B) Buy 10 BSTF calls

C) Buy 10 BSTF puts

D) Sell 10 BSTF puts

For the second question…I understand that there is a 2nd anniversary requirement and every 3 years after, but the question asked “not an anniversary date.”

These were not on the Achievable practice exam but didn’t know if i can ask for your input to help me understand more.

Hey Lashy,

Here are a few quick thoughts on these questions:

  1. Since Johnson is “is apprehensive about liquidity” he’s looking for an investment that can easily be turned back into cash. Annuities, whether variable or fixed, are generally not liquid.

  2. It’s just the wording tripping you up here - you know the core info - that it’s at 2 years and every 3 after that, so 2, 5, 8, 11. The choice of 3 doesn’t fit in. They often include extra information but there generally aren’t many trick questions, so even if the wording seems a little off, just go with the choice that feels like the outlier.

  3. Juan desires income, which is a giveaway that we’re looking to sell options to gain the income from the premium. We know that he owns the shares, which means that the option he’s selling would allow the other party to buy these shares from him if exercised. The only choice that meets both these points is “Sell 10 BSTF calls”.

Thank you for the clarifications! You guys are so awesome. I didn’t realize is asked you those questions on a Sunday(which I didn’t think I will get a response) and my test is today… Monday!

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