When it comes to SIE Exam basics, some topics cannot be avoided. In today’s post, we give you a rundown on the two topics we hear most about from students.
SIE Exam Basics: Bonds and Options
At Professional Exam Tutoring, the two topics we get most are bonds and options.
To truly get a deep understanding of each, many hours, and sometimes years can be required. That said, since the SIE exam is a standardized exam, you don’t need to know the in-depth knowledge as long as you can answer the question.
To this point, some basics from the bonds section that you’ll need to know include identifying the different types of yields. Yield to call, yield to maturity, current yield, and nominal yield are all important.
Furthermore, knowing some basic differences between corporate bonds, municipal bonds, and treasury bonds are also key.
For instance, a basic understanding of a revenue bond versus a general obligation bond is important for municipal debt. On the other hand, you should know the approximate maturity dates for T bills, treasury, notes, and treasury bonds. When we say you “should know” something about these items, think two-to-three bullet points of knowledge for each.
Options on the other hand, maybe even more confusing, but some basic tricks help.
Tricks of a Trade
Knowing the “call up, put down“ phrase is very helpful. Remember that this phrase indicates which direction is “in the money.” And then, you should remember that “in the money” is most important and makes a position more likely profitable for the buyer of an option.
You should also know that most things in the options world are opposites. For instance, if you buy a call option, your bet is up. If you sell a call option, your bet is down (though you are also neutral).
Buy a put option, and your bet is down, etc. If you ever get stuck on direction, usually it’s safe to go back to buying a call option. If you know buying a call option is betting up, then work your way through the opposite to get where you need to go.
Overall, this exam does not go very deep. However, it does cover some sections where you can go very deep. Stick to surface level definitions. That’s all you really need to know. Feel free to reach out in the meantime if you need any help! Good luck!