Series 7 Cheat Sheet

Question 1

Preservation of Capital (safety)

Answer 1

• FDIC insured bank Certificate of Deposits (CDs)
• Money market instruments or funds (commercial paper)
• T-Bills

Question 2

Growth - Balanced/Moderate

Answer 2

• Large-Cap stocks

* Defensive stocks (food, utility, drug companies)

Question 3

Growth – Aggressive

Answer 3

• Technology stocks
• Sector funds (biotech, technology, automotive)
• Cyclical stocks (industries that produce durable goods, such as raw materials or heavy equipment)

Question 4

Income – safety of principal

Answer 4

• US Government Bonds

* US Government Bonds funds

Question 5

Income – tax-free

Answer 5

• Municipal bonds

* Municipal bond funds

Question 6

Income – high-yield

Answer 6

• Corporate bonds
• Corporate bond funds
( NOTE: zero coupon bonds are not suitable for customers seeking income)

Question 7

Income – from a stock portfolio

Answer 7

• Preferred stocks

* Utility stocks

Question 8

Liquidity

Answer 8

• Money market funds

NOTE: DPPs, real estate, and annuities are NOT considered liquid

Question 9

Speculation

Answer 9

• Volatile stocks
• High-yield bonds
• Stock/index options

Question 10

Break Even - Regular C/P

Answer 10

Call Up / Put Down

Question 11

Break Even - Straddle

Answer 11

CALL -UP TOTAL PREMIUM

PUT-DOWN TOTAL PREMIUM

Question 12

Break Even - Spread

Answer 12

Call:

CAL : CALL Spread ADD net-Premium to LOWER SP
CALL -UP DOMINANT SP (Lower)
PSH : PUT Spread SUBTRACT net-Premium to HIGHER SP

Put:
PUT-DOWN DOMINANT SP (Higher)

Question 13

Goals of Credit / Debit Spreads

Answer 13

Credit Spread to Narrow - Expire

Debit Spread to Widen - Exercise

Question 14

Index Option

Answer 14

Reduce Systemic Risk

Question 15

Collar

Answer 15

Hedge a Long Position by
Buying a Put and Writing a Call (Net-Premium = 0)
Limits Upside

Question 16

Options Attitude

Call
Put
Hedged
Long Straddle
Short Straddle
Call Spread 
Put  Spread

Answer 16

Buy Call / Sell Put —- Bull
Buy Put / Sell Call —- Bear
Hedged —- Stock Position (long/Short)
Long Straddle —- Volatile
Short Straddle —- Neutral
Call Spread —- Dominant SP (Lower)
Put Spread —- Dominant SP (Higher)