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FEDERALLY COVERED EXEMPTION

A federally covered exemption provides for a full exemption from state registration for federally covered investment advisers and federally covered securities.

A federally covered investment adviser is one who meets the requirements for assets under management and is registered with the Securities and Exchange Commission (SEC).

A federally covered security is any of the following:

• A security listed on a centralized U.S. stock exchange or on the Nasdaq.

• An investment company security issued under the Investment Company Act of 1940.

• Securities sold to qualified purchasers.

OPTION CONTRACTS

An option is a contract between two parties that determines the time and price at which a stock may be bought or sold. The two parties to the contract are the buyer and the seller. The buyer of the option pays money, known as the option's premium, to the seller. For this premium, the buyer obtains a right to buy or sell the stock, depending on what type of option is involved in the transaction. Because the seller has received the premium from the buyer, the seller now has an obligation to perform under that contract. Depending on the option involved, the seller may have an obligation to buy or sell the stock.

CALL OPTIONS

A call option gives the buyer the right to buy, or to call, the stock from the option seller at a specific price for a certain period of time. The sale of a call option obligates the seller to deliver or sell that stock to the buyer at that specific price for a certain period of time.

PUT OPTIONS

A put option gives the buyer the right to sell or to "put" the stock to the seller at a specific price for a certain period of time. The sale of a put option obligates the seller to buy the stock from the buyer at that specific price for a certain period of time.

 
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