SECTION 2.1.3 OF FINRA'S CONTENT OUTLINE FOR THE SIE EXAM DEALS WITH OPTIONS

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 person, here Kenneth, who is in the money or out of the money. Whether a put is in the money has nothing to do with the person. "In the money" or "out of the money" are characteristics of the option, never of the person.

Bob Eder's Study for the Securities Industry Essentials Exam contains a discussion of the options being in-the-money, at-the-money, and out-of-the-money on page 83 of the text, including examples and practice questions.

Here is the link to FINRA's Content Outline for the SIE exam. See the references to options being in-the-money, at-the-money, and out-of-the-money  (Required Knowledge) of FINRA's Content Outline, section 2.1.3.

Study for the Securities Industry Essentials (SIE) Exam is available from Amazon in both paperback and Kindle e-book versions. 

See Bob Eder's Author Page on Amazon.com.

For questions about Bob Eder's SIE manual, Study for the Securities Industry Essentials (SIE) Exam, or questions in general about the SIE exam, such as options being in-the-money, at-the-money, and out-of-the-money, feel free to email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law in 2001. 

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