FINRA SIE General Information Flashcards

Comprehensive vocabulary flashcards covering options strategies, bond yields, regulations, mutual fund formulas, and market order types for the FINRA SIE exam.

Long call

A bullish strategy representing the right to buy. Maximum Gain (MG) is unlimited, Maximum Loss (ML) is the premium, and the Breakeven (B/E) point is the strike price + premium. Used as a hedge for short stock.

Short call

A bearish strategy representing the obligation to sell. MG is the premium, ML is unlimited, and the B/E is the strike price + premium. Used for income with long stock (covered call).

Long put

A bearish strategy representing the right to sell. MG is strike - premium, ML is the premium, and the B/E is strike - premium. Used as a hedge for long stock (protective put).

Short put

A bullish strategy representing the obligation to buy. MG is the premium, ML is strike - premium, and the B/E is strike - premium. Used for income with cash or willingness to buy stock.

Yield to worst

The lower of the Yield to Maturity (YTM) or the Yield to Call (YTC).

Current Yield (CY)

Calculated as $\frac{\text{annual income}}{\text{market price}}$

Securities Act of 1933

Known as the primary market laws.

Securities Exchange Act of 1934

Known as the secondary market laws.

Investment Company Act of 1940

Laws governing mutual funds and Unit Investment Trusts (UIT).

Dividend Dates (D-E-R-P)

The chronological order of dividend processing: Declaration date, Ex-dividend date, Record date, and Payable date.

Net Asset Value (NAV)

Calculated as $\frac{\text{assets} - \text{liabilities}}{\text{shares outstanding}}$

Public Offering Price (POP) formula (using $)

Calculated as $NAV + \text{sales charge}$ when the sales charge is given in dollars.

Public Offering Price (POP) formula (using %)

Calculated as $\frac{NAV}{100\% - \text{sales charge}}$ when the sales charge is given as a percentage.

Sales Charge Percentage (SC%)

Calculated as $\frac{POP - NAV}{POP}$

Regular-way Settlement

Settlement that occurs in $T+1$.

Cash Settlement

Settlement that occurs on the same day ($T$).

Accrued Interest (Corporate/Municipal/Agency)

Calculated using a 30/360 day count convention.

Accrued Interest (US Government)

Calculated using an Actual/365 day count convention.

Cost basis

$$\text{cost of investment} + \text{commission}$$

Sales proceeds

$$\text{proceeds} - \text{commission}$$

Earned income

Income derived from salary, wages, commissions, and bonuses.

Portfolio income

Income derived from dividends, interest, and capital gains.

Passive income

Income derived from limited partnerships and investment property.

Market order

An order where execution is guaranteed at the next available price.

Limit order

An order at a specified price or better where the price is guaranteed.

Stop order

An order primarily used to protect a position; nothing is guaranteed.

Stop limit order

An order that acts like a stop order but becomes a limit order after the trigger price is hit.