What is the SLoBS / BLiSS mnemonic for the SIE Exam?

SLoBS stands for Sell Limit or Buy Stop — orders placed ABOVE the current market price. BLiSS stands for Buy Limit or Sell Stop — orders placed BELOW the current market price. The key memory trick: BLiSS is Below.

What is the DERP mnemonic for dividend dates on the SIE?

DERP stands for Declaration, Ex-Dividend, Record, Payable. Under T+1 settlement (effective May 2024), the Ex-Date is generally the same business day as the Record Date. To receive the dividend, you must buy the business day before the Record Date.

What is the yield hierarchy for a discount bond on the SIE?

For a discount bond (trading below par), the yield order is: Nominal (Coupon) < Current Yield < Yield to Maturity < Yield to Call. Remember: Nancy Currently Makes Calls (N < C < M < C).

What is the yield hierarchy for a premium bond on the SIE?

For a premium bond (trading above par), the yield hierarchy flips: Nominal > Current Yield > Yield to Maturity > Yield to Call. The letters stay the same (N-C-M-C) but the direction reverses. Yield to Call is the lowest (worst case) for premium bonds.

How do you calculate options breakeven for calls and puts on the SIE?

For calls: Breakeven = Strike Price + Premium (remember 'Call Up'). For puts: Breakeven = Strike Price - Premium (remember 'Put Down'). A call buyer profits when the stock rises above the breakeven; a put buyer profits when the stock falls below the breakeven.

What is the difference between systematic and unsystematic risk on the SIE?

Systematic risk (market risk) affects the entire market and cannot be diversified away — examples include interest rate risk, inflation risk, and political risk. It is measured by beta. Unsystematic risk is specific to a company or industry and CAN be reduced through diversification — examples include business risk, credit risk, and regulatory risk.

What is Regulation T margin requirement for the SIE?

Regulation T (set by the Federal Reserve) requires an initial margin deposit of 50% of the purchase price. The FINRA/NYSE minimum maintenance margin is 25% of the long market value. A margin call is triggered when equity falls below the maintenance requirement. Firms can set higher requirements (house margins) but never lower.

What are leading, lagging, and coincident economic indicators for the SIE?

Leading indicators predict future economic activity (building permits, S&P 500, initial jobless claims, money supply). Lagging indicators confirm trends after they happen (unemployment rate, CPI, prime rate, average duration of unemployment). Coincident indicators move with the economy in real time (GDP, industrial production, personal income). The stock market is a leading indicator.

How do you calculate current yield on a bond for the SIE?

Current Yield = Annual Interest Payment / Current Market Price. Important: always use the ANNUAL interest. If a question says 'semiannual payment of $25,' use $50 as the annual interest. Current yield only measures income — it ignores capital gains or losses.

What is the tax-equivalent yield formula for municipal bonds on the SIE?

Tax-Equivalent Yield = Municipal Bond Yield / (1 - Tax Bracket). For example, a 4% muni bond for someone in the 32% bracket: 4% / (1 - 0.32) = 4% / 0.68 = 5.88% tax-equivalent yield. This means a taxable bond must yield at least 5.88% to beat the muni.

What is the maximum loss on a naked (uncovered) call option?

The maximum loss on a naked (uncovered) call is unlimited. The writer must buy shares at the market price to deliver them, and the stock can theoretically rise infinitely. Writing uncovered calls is the riskiest options strategy tested on the SIE exam.

What does beta measure on the SIE exam?

Beta measures a stock's volatility relative to the overall market. A beta of 1.0 means the stock moves with the market. Beta greater than 1.0 means more volatile (aggressive). Beta less than 1.0 means less volatile (defensive). Beta measures only systematic (market) risk, not total risk.

What is the difference between fiscal and monetary policy on the SIE?

Fiscal policy is controlled by Congress through taxes and government spending. Monetary policy is controlled by the Federal Reserve through interest rates, open market operations, and reserve requirements. The Fed does not set taxes, and Congress does not set interest rates. The SIE exam tests this distinction frequently.

What is the difference between a forward and reverse stock split?

A forward stock split increases the number of shares and decreases the price per share (e.g., 2-for-1: 100 shares at $80 becomes 200 shares at $40). A reverse stock split decreases shares and increases price (e.g., 1-for-10: 1,000 shares at $2 becomes 100 shares at $20). Total value does not change in either case. Reverse splits are often done to avoid exchange delisting.

What is the difference between rights and warrants on the SIE?

Rights (preemptive rights) are offered to existing shareholders to buy new shares below market price, typically short-term (30-45 days). Warrants have an exercise price above market price at issuance, are long-term (often years), and are usually attached to bonds or preferred stock as a sweetener. Rights = below market, Warrants = above market.

What is the relationship between bond prices and interest rates?

Bond prices and interest rates have an inverse (seesaw) relationship. When interest rates go up, bond prices go down, and vice versa. Longer maturity bonds are more sensitive to rate changes. Zero-coupon bonds are the most volatile because they have no coupon payments to offset price changes.

How does short selling work on the SIE exam?

Short selling means borrowing shares, selling them, then buying them back at a lower price. Maximum gain is if the stock goes to $0. Maximum loss is unlimited because the stock can rise infinitely. Short sellers must pay dividends to the lender and must use a margin account. The strategy is bearish — it profits when the stock price falls.

What is the difference between intrinsic value and time value for options?

Intrinsic value is how much an option is 'in the money' — for a call, it's stock price minus strike price (if positive). Time value equals premium minus intrinsic value and reflects the possibility the option becomes more valuable before expiration. At expiration, time value equals zero. An option is 'in the money' if it has intrinsic value, 'out of the money' if it has none.

What are the Fed's main tools for controlling the money supply on the SIE?

The Federal Reserve has four main tools: (1) Open Market Operations — buying and selling Treasury securities, the most frequently used tool; (2) Discount Rate — the rate charged to banks for borrowing; (3) Federal Funds Rate — adjusted through OMO, it's the rate banks charge each other overnight; (4) Reserve Requirement — the percentage of deposits banks must hold, rarely changed. Buying bonds is expansionary (injects money), selling bonds is contractionary (removes money).

What is a UGMA/UTMA custodial account on the SIE?

UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) are custodial accounts with one custodian and one minor. Gifts are irrevocable. No margin trading, short selling, or speculative strategies are allowed. UGMA is limited to financial assets; UTMA can include real estate. Control transfers to the minor at the age of majority (18 or 21 depending on state).

Updated 2026

The Ultimate SIE Cheat Sheet

Q: What is the yield hierarchy for a premium bond on the SIE?

For a premium bond (trading above par), the yield hierarchy flips: Nominal > Current Yield > Yield to Maturity > Yield to Call. The letters stay the same (N-C-M-C) but the direction reverses. Yield to Call is the lowest (worst case) for premium bonds.

Mnemonics, Formulas & Key Concepts

Stop flipping through your textbook. Here are the high-yield mnemonics and concepts that show up on almost every exam — organized so they stick. Many candidates use this as their dump sheet: memorize it, then brain-dump it onto scratch paper the minute your exam timer starts.

About this guide: Written for the 2026 FINRA Securities Industry Essentials (SIE) Exam. Covers all major testable topics including bond yields, order types, options, risk, economics, and margin rules. Updated for T+1 settlement standards (effective May 2024). Published by 2DollarTests.

📊 Bond Yields 💰 Dividends & Splits 📈 Order Types 🎯 Options 🧮 Key Formulas ⚡ Risk 🏦 Economics 🔑 Accounts & Margin

📊

SIE Exam: Bond Yield Hierarchy & Pricing

Section 1 of 8 · The yield hierarchy is one of the most tested SIE concepts

Current Yield

Annual Interest ÷ Market Price

Don't forget to use annual interest. If the problem says "semiannual payment of $25," use $50. Current yield only measures income — it ignores capital gains or losses.

📉 Discount Bond (Below Par)

N < C < M < C

Nancy Currently Makes Calls

Nominal (Coupon) is the lowest yield
Yield to Call is the highest yield
Price goes UP toward par at maturity → investor gains

📈 Premium Bond (Above Par)

N > C > M > C

Same letters, direction flips

Nominal (Coupon) is the highest yield
Yield to Call is the lowest (worst case)
Price goes DOWN toward par at maturity → investor loses premium

Par Bond

All Yields Are Equal

When a bond trades at par ($1,000), the Nominal Yield = Current Yield = YTM = YTC. This is the baseline — understand par, and the discount/premium hierarchies make intuitive sense.

Basis Points

1 BP = 0.01%

100 basis points = 1%. If a yield moves from 4.50% to 4.75%, that's a 25 basis point increase. The exam loves expressing changes in basis points.

Price vs. Yield Relationship

Inverse (Seesaw)

When interest rates go up, bond prices go down — and vice versa. Think of a seesaw. Longer maturity = more sensitive to rate changes. Zero-coupon bonds are the most volatile.

Quick Check

A bond is trading at a discount. Which is higher: the Coupon Rate (Nominal) or the Yield to Maturity?

Yield to Maturity is higher.
Remember N < C < M. Since M (Maturity) is to the right of N (Nominal/Coupon), it is the larger number.

⚠️

Common Exam Trap

The exam may ask "which yield is most important to an investor considering a callable bond trading at a premium?" The answer is Yield to Call — because it's the lowest (worst-case) yield, and callable premium bonds are most likely to be called.

💰

SIE Exam: Dividend Dates (DERP) & Corporate Actions

Section 2 of 8 · DERP is your best friend here

Dividend Date Order

D.E.R.P.

D → E → R → P

Declaration → Ex-Dividend → Record → Payable

Declaration Date: Board of directors announces the dividend
Ex-Dividend Date: The first day the stock trades without the dividend. Under T+1 settlement, this is generally the same business day as the Record Date.
Record Date: You must be on the books as owner by this date.
Payable Date: The dividend check is mailed / deposited.

💡 To GET the dividend: You must buy the business day before the Record Date. If you buy ON the Record Date (Ex-Date), you are too late.

Forward Stock Split

More shares, lower price
2-for-1: 100 shares at $80 → 200 shares at $40
Total value does NOT change
"Cutting the pizza into smaller slices"

Reverse Stock Split

Fewer shares, higher price
1-for-10: 1,000 shares at $2 → 100 shares at $20
Total value does NOT change
Often done to avoid delisting (maintain minimum price)

Rights (Preemptive Rights)

Offered to existing shareholders
Buy new shares below market price
Short-term (typically 30–45 days)
Purpose: maintain proportional ownership

Warrants

Exercise price is above market price at issuance
Long-term (often years, sometimes perpetual)
Often attached to bonds or preferred stock as a "sweetener"
Trade separately on exchanges

⚠️

Common Exam Trap

Rights are issued below market price (a discount to current shareholders). Warrants are issued above market price (they only have value if the stock rises). Don't mix them up — the exam will try.

📈

SIE Exam: Order Types — SLoBS, BLiSS & Short Selling

Section 3 of 8 · SLoBS and BLiSS are all you need

SLoBS ☝️

Orders placed ABOVE market price

Sell Limit — "I'll sell, but only at this price or higher"
Buy Stop — Triggers a buy when price rises to the stop price

BLiSS 👇

Orders placed BELOW market price

Buy Limit — "I'll buy, but only at this price or lower"
Sell Stop — Triggers a sell when price drops to the stop price (stop-loss)

💡 BLiSS is Below. That's all you need — if it's not BLiSS, it's SLoBS (above).

Market Order

Immediate / Best Available

Executes immediately at the best available price. Guarantees execution, not price. Used when speed matters more than price precision.

Stop Order vs. Stop-Limit Order

A stop order becomes a market order once the stop price is reached — execution is guaranteed, but price is not. A stop-limit order becomes a limit order once triggered — price is guaranteed, but execution is not. The exam tests whether you know the difference.

Short Selling

Sell High → Buy Low

Borrow shares, sell them, hope price drops, buy back cheaper. Max gain: stock goes to $0. Max loss: unlimited (stock can rise infinitely). Short sellers are responsible for paying dividends to the lender. Must be done in a margin account.

Quick Check

The market is at $50. You want to buy, but only if it drops to $48. Which order do you place?

Buy Limit Order.
You are buying below the market price. Remember BLiSS (Buy Limit) = Below.

🎯

SIE Exam: Options Breakeven, Intrinsic Value & Strategies

Section 4 of 8 · Call Up, Put Down — that's the foundation

📞 Calls

Buyer: Right to BUY at the strike price
Seller (Writer): Obligation to SELL
Breakeven: Strike + Premium
Bullish — profits when stock goes UP
Buyer max loss: premium paid
Buyer max gain: unlimited

💡 "Call Up" — add the premium to the strike

📉 Puts

Buyer: Right to SELL at the strike price
Seller (Writer): Obligation to BUY
Breakeven: Strike − Premium
Bearish — profits when stock goes DOWN
Buyer max loss: premium paid
Buyer max gain: strike − premium (stock to $0)

💡 "Put Down" — subtract the premium from the strike

Intrinsic Value vs. Time Value

Intrinsic value = how much the option is "in the money." A call with a $50 strike when the stock is at $55 has $5 intrinsic value.
Time value = Premium − Intrinsic Value. It reflects the possibility the option becomes more valuable before expiration. At expiration, time value = $0.

In the money: Has intrinsic value (call: stock > strike; put: stock < strike)
Out of the money: No intrinsic value (all time value)
At the money: Stock price = strike price

Covered vs. Uncovered (Naked) Calls

Covered call: Writer owns the underlying stock. Max loss is limited (can deliver the shares). Generates income on a stock you already own.
Uncovered (naked) call: Writer does NOT own the stock. Max loss is unlimited — must buy shares at market price to deliver. This is the riskiest options strategy on the exam.

Quick Check

An investor buys a call option with a strike of $60 and pays a $4 premium. What is the breakeven?

$64
"Call Up" — Strike ($60) + Premium ($4) = $64 breakeven. The stock must be above $64 for the buyer to profit.

🧮

SIE Exam: Key Formulas — Current Yield, NAV, Tax-Equivalent Yield

Section 5 of 8 · Know how to set these up, not just memorize them

Real Rate of Return

Total Return − Inflation

Also called "inflation-adjusted return." If you made 8% but inflation was 3%, your real return is 5%. This is what your purchasing power actually gained.

Tax-Equivalent Yield

Muni Yield ÷ (1 − Tax Rate)

Used to compare a tax-free municipal bond to a taxable corporate bond. Example: 4% muni, 32% tax bracket → 4% ÷ (1 − 0.32) = 4% ÷ 0.68 = 5.88%. This means a taxable bond would need to yield at least 5.88% to beat the muni.

Mutual Fund NAV

(Assets − Liabilities) ÷ Shares Outstanding

Calculated once per day at market close (4 PM ET). All buy and sell orders placed during the day execute at the next calculated NAV — this is called forward pricing.

Sales Charge %

(POP − NAV) ÷ POP

The sales charge (load) is calculated as a percentage of the Public Offering Price, not the NAV. Max sales charge for mutual funds: 8.5% under FINRA rules.

Earnings Per Share (EPS)

Net Income ÷ Shares Outstanding

Measures profitability on a per-share basis. Used alongside the P/E ratio (Price ÷ EPS) — a high P/E may mean the stock is overvalued or that investors expect high growth.

Dividend Yield

Annual Dividends ÷ Stock Price

Measures the income return on a stock investment. Different from Current Yield (which is for bonds). A high dividend yield can mean a good income stock or a falling stock price — context matters.

⚠️

Common Exam Trap

The sales charge formula divides by POP (the asking price), not by NAV. Also: Current Yield for bonds uses interest, while Dividend Yield for stocks uses dividends. The exam may mix these up in the answer choices.

⚡

SIE Exam: Systematic vs. Unsystematic Risk, Beta & Alpha

Section 6 of 8 · Systematic vs. unsystematic is guaranteed on the exam

🌊 Systematic Risk (Market Risk)

Cannot be diversified away
Affects the entire market
Measured by Beta
Types: Interest rate, inflation/purchasing power, market, reinvestment, political/legislative, currency/exchange rate

💡 Think "SYSTEM" = the whole system is affected

🎯 Unsystematic Risk (Diversifiable)

CAN be reduced by diversification
Specific to a company or industry
Types: Business/financial, credit/default, regulatory, liquidity, call, prepayment

💡 "UNsystematic = UNique to one company = UNdo it with diversification"

Beta

Market = 1.0

Measures a stock's volatility relative to the market. Beta of 1.0 = moves with the market. Beta > 1.0 = more volatile (aggressive). Beta < 1.0 = less volatile (defensive). Beta of 0 = no correlation. Negative beta = moves opposite to the market.

Alpha

Measures excess return above what beta predicted. Positive alpha = the portfolio outperformed its expected risk-adjusted return. Negative alpha = underperformed. Alpha is what active managers are trying to generate.

Standard Deviation

Measures total risk (both systematic and unsystematic). Higher standard deviation = wider range of returns = more volatile. Unlike beta (which only measures market risk), standard deviation captures everything.

Quick Check

An investor holds a diversified portfolio of 50 stocks. Which type of risk has been primarily reduced?

Unsystematic (diversifiable) risk.
Diversification reduces company-specific risk. Systematic risk (market risk) remains — you can't diversify it away. That's why even a well-diversified portfolio still loses value in a market crash.

🏦

SIE Exam: Economic Indicators & Federal Reserve Tools

Section 7 of 8 · Know which indicators lead, lag, and coincide

Leading Indicators

Predict the Future

Change before the economy does. They're crystal ball indicators:
• Building permits • S&P 500 stock index • Initial jobless claims (inverted — rising claims = bad) • Money supply (M2) • New orders for manufactured goods • Consumer expectations

💡 The stock market is a LEADING indicator — it drops before recessions and rises before recoveries.

Lagging Indicators

Confirm the Past

Change after the economy has already shifted:
• Unemployment rate • CPI (Consumer Price Index) • Prime rate • Average duration of unemployment • Corporate profits

💡 CPI and unemployment are LAGGING — they confirm what already happened. The exam loves testing this.

Coincident Indicators

Move in Real Time

Change at the same time as the economy:
• GDP (Gross Domestic Product) • Industrial production • Personal income • Nonagricultural payrolls

Federal Reserve Tools

The Fed has three main tools to control the money supply:

1. Discount Rate — The rate the Fed charges banks for short-term borrowing. Raising it = tighter money.
2. Federal Funds Rate — The rate banks charge each other for overnight loans. The Fed's primary tool — adjusted through open market operations.
3. Open Market Operations (OMO) — Buying and selling Treasury securities. Buy bonds = inject money (expansionary). Sell bonds = remove money (contractionary). This is the Fed's most frequently used tool.
4. Reserve Requirement — The percentage of deposits banks must hold. Raising it = less lending. Rarely changed — the "nuclear option."

Expansionary (Easy Money)

Fed buys securities
Lowers discount rate & fed funds
Decreases reserve requirements
Goal: stimulate growth, fight recession
Risk: inflation

Contractionary (Tight Money)

Fed sells securities
Raises discount rate & fed funds
Increases reserve requirements
Goal: slow growth, fight inflation
Risk: recession/unemployment

⚠️

Common Exam Trap

Fiscal policy (Congress — taxes and spending) vs. Monetary policy (the Fed — money supply and interest rates). The exam will mix these. Remember: the Fed doesn't set taxes, and Congress doesn't set interest rates.

🔑

SIE Exam: Margin Rules (Reg T), Account Types & UGMA/UTMA

Section 8 of 8 · Reg T, maintenance margin, and account types

Regulation T (Initial Margin)

50% Deposit Required

Set by the Federal Reserve. When buying on margin, you must deposit 50% of the purchase price. Example: buy $20,000 of stock → deposit $10,000 cash, borrow $10,000 from the broker.

Maintenance Margin

25% Minimum Equity

Set by FINRA/NYSE (not the Fed). Your equity must stay above 25% of the long market value. If it drops below, you receive a margin call — deposit more cash or securities, or the broker can liquidate your positions.

Long Margin Equation

Equity = LMV − Debit

LMV (Long Market Value) − Debit Balance (what you owe the broker) = Equity.
The debit balance doesn't change when stock price moves — only LMV and equity change. If equity falls below 25% of LMV, a margin call is triggered.

Cash Account

Must pay in full (no borrowing)
Payment due by T+1 (settlement date)
No margin calls
Free-riding prohibited (90-day freeze)

Margin Account

Borrow from broker to buy securities
Interest charged on borrowed amount
Required for short selling and certain options
Must sign a margin agreement and receive a risk disclosure

UGMA / UTMA (Custodial)

One custodian, one minor per account
Gifts are irrevocable (can't take it back)
No margin, no short selling, no speculative strategies
UGMA: limited to financial assets. UTMA: can include real estate
Control transfers to the minor at age of majority (18 or 21 by state)

Fiduciary / Trust Accounts

Fiduciary acts in the best interest of another person
Must follow the Prudent Investor Rule
Common types: trust, estate, guardianship, conservatorship
Cannot exceed authority granted by the governing document

Quick Check

An investor buys $40,000 of stock on margin. How much must they deposit under Reg T?

$20,000
Reg T = 50%. $40,000 × 50% = $20,000 initial deposit. The remaining $20,000 is the debit balance (borrowed from the broker).

⚠️

Common Exam Trap

Reg T (50%) is set by the Federal Reserve. Maintenance margin (25%) is set by FINRA/NYSE. The exam asks "who sets what" — don't confuse the authorities. Also: firms can require higher margins than the minimums (called "house requirements"), but never lower.

Test Yourself

Concept: Dividend Dates (T+1 Rule)

The Record Date is Thursday, May 15th. To receive the dividend, when is the last day you can purchase the stock?

Correct!

Under T+1 settlement, you must buy the business day before the Record Date. Buying on Wednesday, May 14th settles on Thursday, May 15th, making you a holder of record.

We have 3,000+ more questions like this.

Not quite

Remember T+1 Settlement. It only takes 1 day to settle now. If you buy on Tuesday (May 13), you are early (settles Wednesday). The last day is Wednesday (May 14), which settles on the Record Date (Thursday).

Don't Memorize. Understand.

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SIE Exam: Bond Yield Hierarchy & Pricing

📉 Discount Bond (Below Par)

📈 Premium Bond (Above Par)

SIE Exam: Dividend Dates (DERP) & Corporate Actions

Forward Stock Split

Reverse Stock Split

Rights (Preemptive Rights)

Warrants

SIE Exam: Order Types — SLoBS, BLiSS & Short Selling

SIE Exam: Options Breakeven, Intrinsic Value & Strategies

📞 Calls

📉 Puts

SIE Exam: Key Formulas — Current Yield, NAV, Tax-Equivalent Yield

SIE Exam: Systematic vs. Unsystematic Risk, Beta & Alpha

🌊 Systematic Risk (Market Risk)

🎯 Unsystematic Risk (Diversifiable)

SIE Exam: Economic Indicators & Federal Reserve Tools

Expansionary (Easy Money)

Contractionary (Tight Money)

SIE Exam: Margin Rules (Reg T), Account Types & UGMA/UTMA

Cash Account

Margin Account

UGMA / UTMA (Custodial)

Fiduciary / Trust Accounts

Concept: Dividend Dates (T+1 Rule)

Don't Memorize. Understand.

SIE Exam Cheat Sheet Summary