Series 65 Exam Topic

Here is some great information for the series 65 exam !

Efficient Market Theory



The efficient market theory believes that all of the available information is priced into the market at any given time and it is impossible to beat the market by taking advantage of price or time inefficiencies. Proponents of the efficient market theory may follow the theory in the following ways:


Weak-form efficiency - states that the future price of a security can not be predicted by studying the past price performance of the security. This form of the theory believes that technical analysis can not produce excess returns.


Semi-strong form efficiency – states that the market price of a security adjusts too rapidly to newly available information to achieve an excess return by trading on that information.


Strong-form efficiency – states that the current price of a security reflects all information known and unknown to the public and there is no opportunity to earn excess returns.

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Series 6 Exam Question

Here is a great example of a series 6 exam question:

Which of the following statements is (are) true of a variable annuity's separate account?




I. It is used for the investment of monies paid by variable annuity contract holders

II. It is separate from the insurance company's general investments

III. It is operated in a manner similar to an investment company

IV. It is as much a security as it is an insurance product
 
A) I only
B) II and III
C) I and IV
D) I, II, III, IV
 
D) The separate account is used for the monies invested in variable annuities. It is kept separate from the general account and operated very much like an investment company. It is considered both an insurance product and an investment product.
 
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Series 4 Exam - Series 4 Exam Topic

Here are some great details for non standard options for the series 4 exam

Binary Options


Binary Options are a way to speculate on the price of an underlying index based on your opinion of where a market will be in a certain period of time. Binary options are contracts that, at expiration, pay out a pre-determined, fixed amount or nothing at all. The payout amount for CBOE binary options is $100 per contract.

Binary options are based on an underlying security, have various strike prices as well as various expirations. CBOE lists both call and put binary options. If, at expiration, the price of the underlying security closes at or above the selected strike price, the buyer of a binary call option receives $100 per contract. If the underlying security closes at a price that is below the strike price on the expiration date, the buyer receives nothing.

In the case of binary put options, the put buyer receives $100 per contract if the underlying security closes below the strike price at expiration, and nothing if the underlying security closes at or above the strike price at expiration. As with traditional options, a binary option position may be liquidated (bought or sold to close) prior to expiration. The price of a binary option usually reflects the perceived probability that the underlying security price will reach or exceed (for call binary options) or fail to reach or exceed (for put binary options) the selected strike price at expiration. The cost of CBOE binary options will normally be quoted at a price between zero and $1 (which equates to $1 to $100 per contract). Buyers of binary options pay for the contract at the time of purchase.

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Series 65 Exan - Series 65 Exam Question

Here is a great series 65 exam question

What does a proponent of fundamental analysis use to value common stock?


I. Trade volume

II. Discounted Cash Flow

III. P/E ratio

IV. Moving price average
 
A) I and III
 
B) II and IV
 
C) II and III
 
D) I and IV
 
Answer: C
 
The correct answers are II and III. A fundamental analyst would look at the financial make up of the company and how that financial value of the company is priced in the market place. Of the choices listed a fundamental analyst would use a discounted cash flow method which would be used to place a current value on the company's future earnings and a P/E ratio which would tell the analyst what people are paying in the market place for those earnings on a per share basis. Moving averages and trade volume would be used by an investor interested in technical analysis.
 
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Series 24 Exam Tip!

Here is some good information for the series 24 exam relating to trading and market making. This section of the exam tends to present test takers with a lot of challenges



Which Side of The Trade Reports to ACT / TRF?


In order to ensure that trades are not reported twice to the ACT /TRF system, the following rules have been enacted to determine who reports the trade:


In a transaction between two market makers negotiated over the phone the sell side of the transaction reports.


In a transaction between two market makers, the executing market maker reports.


In a transaction between two non market makers, the executing firm reports.


In a transaction between a member firm and a customer, the member firm reports.



TAKE NOTE!


The executing side of the trade for TRF reporting is the firm or market maker to whom the trade was directed. The firm who executes the trade is the firm who receives the order.

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