STUDY FOR THE SECURITIES INDUSTRY ESSENTIALS EXAM (SIE) EXAM

Before taking the Securities Industry Essentials exam, make sure that  you have a working knowledge of how put and call options work. Section 2.1.3 of FINRA's SIE Content Outline tells us that the SIE exam covers a candidate's knowledge of options expiration dates, strike prices, premiums, and whether options are in-the-money, at-the-money, or out-of-the money. So imagine that you face this Bob-Eder-created question on the SIE exam. How would you answer it? When XYZ stock is at 62, Kenneth purchases one put XYZ Jan 60 for a premium of three. XYZ stock then declines to 59. Which of the following is correct? a)    Kenneth is in the money b)    Kenneth is out of the money c)    the XYZ 60 put is in the money d)    the XYZ put is out of the money The answer is (c). The XYZ 60 put is in the money because XYZ stock at 59 is below the strike price of 60. Whenever, in the case of a put, the stock price is below the strike price of the put, the put is in the money. It is never the perso

Taking the Securities Industry Essentials exam soon? How would you answer the following hypothetical question on inverse relationship between bond dollar price and bond yield? Harry purchases $100,000 Treasury bills having a maturity of three months and yielding 4.43 percent. Two months later, Harry sells the T bills in the open market when they are yielding 4.02 percent. Harry has realized: a.    a gain b.    a loss c.    neither a gain or a loss d.    not enough information to answer The answer is (a). Harry has realized a gain on his T bills. Why a gain? Because Harry purchased these T bills when they were yielding 4.43 percent. Then he sold the T bills when they were yielding 4.02 percent. The yield has decreased from 4.43 to 4.02 percent. Since yield is inversely related to dollar price, that means that Harry's sale dollar price was higher than his purchase dollar price. Harry bought low and then sold high in terms of dollar price. Thus Harry realized a gain. How do we know th

The Securities Industry Essentials (SIE) includes questions on SEC Rule 144. This rule governs the sale of control stock and restricted shares by certain shareholders affiliated with, or connected to, a publicly traded company. Don't believe me? Check section 2.1.1 of FINRA's Content Outline for the SIE exam. Under Required Knowledge, FINRA lists SEC Rule 144. Therefore, before going in to sit for the SIE exam, make sure you are prepared with knowledge of Rule 144. Bob Eder's Study for the Securities Industry Essentials Exam contains three pages of discussion on the aspects of Rule 144, including requirements that must be met before the sale of either control stock or restricted shares. Here is the link to FINRA's Content Outline for the SIE exam.   See the references to SEC Rule 144 under section 2.1.1 (Required Knowledge) of FINRA's Content Outline. Study for the Securities Industry Essentials (SIE) Exam  is available from Amazon in both paperback and Kindle e-bo

Lots of topics and subjects are covered by the Securities Industry Essentials (SIE) exam. One of the topics concerns convertible securities. "Convertible" means that the security, whether a preferred share or a corporate bond may be converted into shares of the company's common stock at the option of the convertible owner. Consider this example of convertible bonds issued by ABC Corporation. Each bond has a par value of $1,000. That means that the face value of each bond is $1,000. Assume that each ABC convertible bond is able to be converted into 20 shares of ABC common. For this example, assume that each ABC common sells for $52. Be prepared to see questions that ask for the following: 1) the conversion price of ABC bonds; 2) the parity price of ABC common; 3) the parity price of ABC bonds; 4) the conversion ratio of ABC bonds; and 5) whether a customer who owns ABC convertible bonds would profit upon converting into common shares. Bob Eder's Study for the Securitie

The Securities Industry Essentials exam asks questions on many different topics pertaining to the securities business. One such topic is the offering of new issues of stocks and bonds to the general public. These new offerings raise capital for the issuing companies which allows them to pursue new ventures or increase the size of their present businesses. FINRA's Content Outline for the SIE exam covers new offerings in paragraph 1.4. If you plan to sit for the SIE exam, do not neglect studying this section on underwriting before you go and take the test. Paragraph 1.4 of the Content Outline discusses the roles of participants in new offerings, such as investment bankers, underwriting syndicates, and municipal advisers. You should know and understand what each of these participants do. Bob Eder's book, Study for the Securities Industry Essentials (SIE) Exam, covers this subject in detail. For example, here is a paragraph from Bob Eder's SIE book: "Underwriting Syndica

In preparing for the Securities Industry Essentials exam (SIE), students can deprive themselves of an important study aid if their study manual does not contain a full glossary of terms. A glossary of terms is often missing in study manuals where the authors cut corners. A glossary is important because it allows the reader to use its content as a check list of important items in preparation for the SIE test. Bob Eder's Study for the SIE Exam has a full glossary. There are over 200 entries in Bob Eder's SIE glossary, beginning with 12b-1 fees and ending with Yield to Maturity. Consider Bob Eder's glossary where it covers balance of payments and balance of trade. These are difficult concepts for many SIE applicants. Here are the descriptions from Bob Eder's glossary: "Balance of Payments —this is not the same as balance of trade. BOP includes balance of trade, but also adds inflows coming into the U.S., and subtracts outflows, whether involving persons, companies,

Don't go in and sit for the Securities Industry Essentials e xam (SIE) without first mastering the definitions of, and the differences between, prime brokers, introducing brokers, and clearing brokers. Why? Because FINRA lists these topics as important in section 1.1.4 of its Content Outline for the SIE exam. Bob Eder covers these subjects on pages 15 and 16 of his book, Study for the SIE Exam . Here is a sample of his discussion: Introducing Brokers (1.1.4) These broker/dealers do not wish to maintain a back office handling paperwork, trade confirmations, handling of certificates and trade processing. They avoid this work by using a clearing broker to handle these functions. In effect, one can think of introducing brokers as branch offices and the clearing broker as the main office. The introducing broker will open an account for a client, then transmit all the information about the client, such as address, business, investment objective to the clearing brokerage firm. Here is the

Have you ever taken a look at FINRA's Study Outline for the Securities Industry Essentials exam? Why do I ask this question? Because the Study Outline indicates what you need to know to pass the test, and also, equally important, what you don't need to know. Everything that is mentioned in FINRA's Study Outline is grist for the SIE exam, but stuff that is not mentioned means that it is not tested and therefore not necessary to know. This is why Bob Eder's Study for the Securities Industry Essentials Exam is so useful. Every major paragraph in the book connects to the Study Outline. For example, the Study Outline in section 3.1.3 talks about Regulation T, regular-way settlement, and the time periods allowed. Our book discusses these topics and next to each appropriate paragraph indicates "3.1.3." This is an important aid for an applicant's study because it says that this material and these topics are tested on the SIE exam. Make sure that if you purchase a