Pass the 7Free diagnostic

Free Series 7 lessons

The whole course in teaching order. It starts from zero, and every term is explained the first time it comes up.

Start here: the basics

Stocks, bonds and who does what

  1. Stocks: owning a slice of a company · A share of stock is a small piece of a company · Owners share in the profits, the price and the risk
  2. Bonds: lending money for interest · A bond is a loan you make to a company or government · Par, maturity and coupon: the promise in a bond
  3. Who does what: customers, reps and firms · The customer, the rep, the firm and FINRA · Broker or dealer: the two ways a firm trades

Seeking business

Communications and telemarketing

  1. Communications with the public (Rule 2210) · Who reads it decides which rules apply · A principal approves retail pieces before they go out · Some retail pieces also get filed with FINRA
  2. Telemarketing rules (Rule 3230) · Cold calls run from 8 a.m. to 9 p.m., their time · A do-not-call request is honored within 30 days · A recent business relationship lets the firm call

Opening accounts

Know your customer, account types, margin papers

  1. Customer ID, KYC and suitability information · Every new account starts by proving who you are · Know your customer starts on day one, for every account · A recommendation has to fit the investment profile
  2. Account types and ownership · In a JTWROS account, the survivors get it all · Tenants in common: each share goes to the owner's estate · A custodial account holds a gift for one child
  3. Margin account documents · A margin account lets you buy with the firm's money · Two papers every margin customer must sign · The loan consent is optional; the risk notice comes yearly

Orders and trading

Order types, where stops sit, and T+1 settlement

  1. Order types and where stops sit · A market order buys or sells right now · A limit order fills at your price or better · A stop order waits for a trigger, then becomes a market order
  2. Settlement: regular way and options · A stock trade settles one business day later · Under T+1, the ex-dividend date is the record date · Corporate bonds and options settle T+1 too

Bonds and munis

Price, yield and tax-free income

  1. Bond prices and yields · When rates rise, the price of an old bond falls · A premium is a price above par, a discount is below · A bond has four yields: nominal, current, to maturity, to call · Premium or discount decides which yield is highest
  2. Current yield and annual interest · Annual interest is the coupon times par · A bond quote is a percent of par · Current yield is interest divided by today's price
  3. General obligation vs revenue bonds · A general obligation bond is paid back from taxes · A revenue bond is paid back from what the project earns · Special tax bonds count as revenue, double-barreled as GO
  4. Tax-equivalent yield · Muni interest is free of federal income tax · Tax-equivalent yield: divide by what you keep · After-tax yield: the same math, the other way

Margin accounts

Reg T, maintenance calls, excess equity and SMA

  1. Reg T initial requirement and the $2,000 minimum · Buying on margin means part of the money is borrowed · Reg T says you put up half · A new margin account needs at least $2,000
  2. Maintenance requirement and the margin call price · After you buy, your equity must stay at 25% · A margin call asks you to fill the gap · The call price: divide the debit by 0.75
  3. Excess equity and SMA · Equity above the 50% line goes to SMA · SMA stays when prices fall and drops when you use it · SMA buys twice its size in stock

Options: calls and puts

Rights, profit and loss, breakevens, straddles and covered calls

  1. Calls and puts: rights and obligations · An option locks in a price for a small fee · A call is the right to buy, a put the right to sell · Buyers have rights, sellers have obligations
  2. Long call and long put profit at expiration · Call profit: what it's worth minus what you paid · Put profit flips the first subtraction · Out of the money, a buyer loses the premium
  3. Breakeven points · A call breaks even at strike plus premium · A put breaks even at strike minus premium · With stock, breakeven starts from what you paid
  4. Maximum gain and loss · A buyer can lose only the premium · Calls have no ceiling · A stock stops at zero, so a put has a ceiling
  5. Long straddles · A long straddle bets on a big move either way · A straddle has two breakevens
  6. Covered calls · A covered call is a call on stock you own · In a covered call, the premium lowers your cost · In a covered call, your gain stops at the strike