Why T Charts aren’t going to help you answer options questions on the Series 7

The Series 7 exam tests for a wealth of knowledge, but the options questions and other calculations seem to be the ones that are most daunting to examinees. Most securities training courses want to give you formulas to solve this and that, but studying by memorizing formulas is a failed test strategy- here’s why:

It’s impossible to memorize the different ways a question may be asked.

The test writers are notorious for asking questions that involve varied vocabulary and are written in a way that requires real understanding of a subject. They aren’t trick questions (in fact, most are quite straightforward) but they are challenging because they test an examinees familiarity with the topic and its jargon. With about 35 questions that could deal with options strategies for the test you can imagine all the possible scenarios that may arise.

T Charts don’t help you understand what is being asked in a question.

Understanding of options themselves is the MOST important part of being able to successfully answer a test question. The fact is, if you understand how options work at a basic level, you can pretty much figure out (using basic arithmetic) how to solve any math related option problem. T Charts may help you organize your sums once you’ve understood the concepts, but they certainly aren’t a magic bullet to replace a real grasp of the concepts.

Questions found on the Series 7 can often be multi-layered.

You may remember in school that cramming for an exam never really worked, and in the case of the General Securities Representative Exam this couldn’t be truer. It’s not a far cry to say that you may need 3-4 pieces of separate knowledge to make sense of the info they give you in a single question.

Comprehensively learning all the securities material will put you in a better position to succeed and we have the tools to help you do that in an efficient and effective way. If you want to give yourself the best chance of passing the first time, subscribe to our blog and enroll to our securities training material. We outline the correct way to prepare for FINRA exams.

The Seven Series Mystery

Worried you’re not going to pass the Seven Series exam? Simple answer: You won’t. IF you listen to advice from people who took it ten years ago. Chances are, the advice you’ve heard is to take a lot of questions, and not read the book. You’re welcome to do this if failure is your goal.

Many of the people giving you advice took their exam in the early 2000’s, if not the 90s. Things have changed, and you can’t expect everything to be the same as it was back then. FINRA used to go by the name NASD, and vendors helped to write exam questions. This is no longer the case, and your Series 7 exam will be nothing like your Dad’s.

Forget simple definitions and math problems. Post-2011, the number of options dropped from between 40 and 55 to the twenties. The test now covers more suitability and situation questions than ever. In terms of the notorious margin questions, there’s no need to over-stress, seeing as you will get 10 questions. A mere 3 of these (if any) will involve you needing to perform calculations.

The Series 7 is not an IQ test. It’s a work test. If you do want to pass, don’t focus on jamming in too much information- focus on concepts. It’s not about remembering everything like a parrot. It’s about understanding everything! The exam is about understanding various concepts and applying them together correctly to figure out the right answer.

Let’s look at a sample question related to dividends that you may encounter on the exam:

An investor buys 200 shares of XYZ common stock at $64.50 per share. The stock has a quarterly dividend of $1.50. If the common stock is currently trading at $82.50 per share, which of the following equals the current annual dividend yield?

−             8.42%

−             7.27%

−             7.45%

−             8.14%

What information do you need to know to answer this question?

  1. Well, first, you need to know the formula for current annual dividend yield, which is:

(Current Annual Dividend)/ (Current Market Value of an Investor’s holdings of Stock)

From there you will need to figure out how to use the information in the question to obtain numbers to plug into the formula.

  1. So next you may try to figure out the number of Current Annual Dividend. You’re given the quarterly dividend so to get the annual dividend you multiply the given quarterly figure by four (since there are four quarters in a year) … ($1.50 x 4 = $6 annual dividend)

But this $6 annual dividend is per share so current annual dividend that investor receives is (200 x $6 = $1,200)

  1. Then to figure the market value you need to know to multiply the shares of stock by the stock price (200 x $82.50 = $16,500)
  2. Now you can plug in the numbers to the Current Annual Yield Formula:

($1,200/$16,500 = 7.27%)

You can see the question doesn’t involve anything exceptionally complicated but does require several steps and understanding of the concepts surrounding dividends.

So, remember: Learn to understand and make sense of what you are learning, as opposed to trying to jam everything in. You don’t need to memorize the FINRA prep material, but you need it stored in your subconscious for safe-keeping. Trust us – you’ll thank us later.

Most importantly, don’t fret about getting questions wrong. If you follow this advice during your Series 7 exam prep, you’ll be fine. Start studying early enough, and you’ll walk away with flying colors. Don’t forget to register for our online course to make sure failure is NOT an option!

New Series Exam Structure by FINRA

Want to penetrate the financial services industry? Writing your Series 7 exam soon? If so, the most valuable piece of advice we can give you is this: Do NOT take advice from people who have already taken the test. FINRA is changing the way the test is done, and this article is the only source of information you should take advice from!

Joe McDonald, senior director of FINRA’s Continuing Education group, stated that the changes are a part of FINRA360; FINRA’s Organizational Improvement Initiative. The new exam will hit the world from the 1st of October 2018. Anyone aged 18+ may take part.

The biggest change.

One of the most exciting things for students and candidates interested in showing their basic industry knowledge to future employers is this: YOU DON’T HAVE TO BE ASSOCIATED WITH A FINANCIAL FIRM TO TAKE THE EXAM! The test will cover fundamental concepts that are vital throughout the securities industry. If you pass, your result will be valid for four years.

So, here’s the deal.

FINRA is changing the structure of the Seven Series Exam (and others in general). The SIE exam features 75 questions, which you have 105 minutes to complete. The new Series 7 exam features 125 questions, which you have 180 minutes to complete (as opposed to 250 and 360 minutes). There is, however, one thing that WILL stay the same. The test is challenging – and you NEED to be prepared! You must commit enough time and dedication; studying as much as possible to ensure you pass with flying colors!

So, without further ado, let’s take a look at what’s changing.

The Financial Industry Regulatory Authority (FINRA) announced in late 2017 that they were going to start streamlining the competency of their exams. FINRA is creating a new Security Industry Essentials (SIE) exam while revising rep-level qualifications. This move was approved by the U.S. Securities and Exchange Commission, with the vision of creating new opportunities for people looking to enter the securities industry.

FINRA has restructured its exam program, following the introduction of the SIE exam, to make sure there is no duplicated testing of general knowledge. FINRA has created a far more efficient format designed to diminish overlapping licensing exams. They want to make sure that content is relevant to TODAY’S industry while testing additional knowledge.

The team took a step back to reexamine the entire program, rethinking how the structure should be and revolve it around how the industry looks in today’s world. “This is it,” said John Kalohn, Vice President of FINRA’S Testing and Continuing Education Group.

The future starts now.

Once you’ve got a foot in the door with your SIE exam, you can start making efforts to get hired by a FINRA-regulated firm. Your exam is the first step! At the end of the day: Yes, FINRA has made some pretty big changes. However, one thing that should never change is your attitude.

Stay focused and prepare yourself for a challenge. With the right prep, you CAN and WILL pass your exam. If you are ready to start preparing for the test, why not enroll in our online course here? It’s the best way to ensure that your hard work pays off.

Reference

http://www.finra.org/investors/highlights/new-finra-exam-open-doors-financial-industry