Series 7 Exam Cheat Sheet 2026: Every Formula, Rule & Strategy You Need

Series 7 Exam Cheat Sheet 2026

This is the most comprehensive Series 7 cheat sheet available online -- completely free. It covers every formula, rule, and concept you need to pass the FINRA Series 7 (General Securities Representative) exam. Bookmark this page and review it before your exam.

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Exam Overview: Know What You're Facing

The Series 7 exam is administered by FINRA and is required for anyone who wants to solicit, buy, or sell securities products.

The 4 Job Functions (Question Distribution)

Understanding where the questions come from tells you where to focus your study time:

Exam Strategy: Function 3 is 73% of your exam. This includes options, bonds, suitability, and investment recommendations. Master these topics first and you'll cover nearly three-quarters of the test.

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Options Strategies (THE Most Tested Topic)

Options are the single most heavily tested area on the Series 7. You must know max gain, max loss, and breakeven for every basic strategy. Memorize this section cold.

Calls vs. Puts: The Basics

Memory Tip: "Call Up, Put Down" -- Call buyers want the stock to go UP. Put buyers want the stock to go DOWN.

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The Four Basic Option Positions

This is the single most important table on the Series 7 exam:

Example -- Long Call:

• Buy 1 ABC Oct 50 Call @ 3
• Max Gain: Unlimited (stock can rise indefinitely)
• Max Loss: $300 (the premium paid: 3 x 100 shares)
• Breakeven: $53 (strike 50 + premium 3)
• Profitable when ABC rises above $53

Example -- Long Put:

• Buy 1 XYZ Nov 40 Put @ 2
• Max Gain: $3,800 (strike 40 - premium 2 = 38, x 100 shares)
• Max Loss: $200 (the premium paid: 2 x 100 shares)
• Breakeven: $38 (strike 40 - premium 2)
• Profitable when XYZ falls below $38

Key Rule: Buyers of options have RIGHTS. Sellers (writers) of options have OBLIGATIONS. Buyers pay premiums. Sellers receive premiums.

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Option Premium Components

$\text{Premium} = \text{Intrinsic Value} + \text{Time Value}$

Intrinsic Value (In-the-Money Amount):

Example:

• Stock trading at $55
• Call with strike price of $50: Intrinsic value = $55 - $50 = $5
• Put with strike price of $50: Intrinsic value = $0 (out of the money)
• If the call premium is $7, then: Time value = $7 - $5 = $2

Exam Tip: An option can never have negative intrinsic value. The minimum intrinsic value is always $0.

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Spreads

A spread involves buying AND selling options of the same type (both calls or both puts) on the same underlying security, but with different strike prices and/or expiration dates.

Bull Call Spread (Debit Call Spread)

• Buy a call with a lower strike price
• Sell a call with a higher strike price
• Outlook: Moderately bullish
• Net Cost: Debit (you pay a net premium)

Example:

• Buy 1 ABC Jan 40 Call @ 5
• Sell 1 ABC Jan 50 Call @ 2
• Net Debit = $3 (paid 5 - received 2)
• Max Gain: (50 - 40) - 3 = $7 (x 100 = $700)
• Max Loss: $3 (x 100 = $300)
• Breakeven: 40 + 3 = $43

Bear Put Spread (Debit Put Spread)

• Buy a put with a higher strike price
• Sell a put with a lower strike price
• Outlook: Moderately bearish
• Net Cost: Debit (you pay a net premium)

Example:

• Buy 1 XYZ Mar 60 Put @ 6
• Sell 1 XYZ Mar 50 Put @ 2
• Net Debit = $4 (paid 6 - received 2)
• Max Gain: (60 - 50) - 4 = $6 (x 100 = $600)
• Max Loss: $4 (x 100 = $400)
• Breakeven: 60 - 4 = $56

Bull Put Spread (Credit Put Spread)

• Sell a put with a higher strike price
• Buy a put with a lower strike price
• Outlook: Moderately bullish
• Net Credit: You receive a net premium

Bear Call Spread (Credit Call Spread)

• Sell a call with a lower strike price
• Buy a call with a higher strike price
• Outlook: Moderately bearish
• Net Credit: You receive a net premium

Spread Memory Trick: In a debit spread, you always buy the more expensive option. In a credit spread, you always sell the more expensive option. Debit spreads: max loss = net debit. Credit spreads: max loss = difference in strikes - net credit.

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Straddles

A straddle involves buying OR selling BOTH a call AND a put on the same stock, same strike price, same expiration.

Long Straddle (Buy Both)

• Buy a call and Buy a put (same strike, same expiration)
• Outlook: Expect high volatility (big move either direction)
• Max Gain: Unlimited (on the upside)
• Max Loss: Total premiums paid (both call + put)
• Breakeven Points (two):
  • Strike + Total premiums (upside)
  • Strike - Total premiums (downside)

Example:

• Buy 1 ABC Oct 50 Call @ 4
• Buy 1 ABC Oct 50 Put @ 3
• Total premiums = $7
• Upside Breakeven: 50 + 7 = $57
• Downside Breakeven: 50 - 7 = $43
• Max Loss: $7 (x 100 = $700) -- occurs at exactly $50

Short Straddle (Sell Both)

• Sell a call and Sell a put (same strike, same expiration)
• Outlook: Expect low volatility (stock stays near strike)
• Max Gain: Total premiums received
• Max Loss: Unlimited (on the upside)
• Breakeven Points: Same formula as long straddle

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Covered Calls and Protective Puts

Covered Call (Income Strategy)

• Own 100 shares of stock + Sell 1 call on that stock
• Outlook: Neutral to slightly bullish
• Purpose: Generate income (collect premium)

Example:

• Own 100 shares of ABC purchased at $45
• Sell 1 ABC Oct 50 Call @ 3
• Max Gain: (50 - 45) + 3 = $8 (x 100 = $800)
• Max Loss: 45 - 3 = $42 (x 100 = $4,200) -- stock drops to $0
• Breakeven: 45 - 3 = $42

Protective Put (Insurance Strategy)

• Own 100 shares of stock + Buy 1 put on that stock
• Outlook: Bullish but want downside protection
• Purpose: Limit losses (like buying insurance)

Example:

• Own 100 shares of XYZ purchased at $60
• Buy 1 XYZ Nov 55 Put @ 2
• Max Gain: Unlimited
• Max Loss: (60 - 55) + 2 = $7 (x 100 = $700)
• Breakeven: 60 + 2 = $62

Exam Tip: A covered call LIMITS upside potential but provides income. A protective put PRESERVES upside potential but costs money. Know when each is suitable.

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Suitability Rules

FINRA Rule 2111 -- Suitability

FINRA Rule 2111 requires that a broker-dealer or registered representative have a reasonable basis to believe a recommendation is suitable for the customer. There are three suitability obligations:

Regulation Best Interest (Reg BI)

Since June 2020, broker-dealers must also comply with Regulation Best Interest, which requires:

• Disclosure Obligation -- Provide Form CRS (Client Relationship Summary)
• Care Obligation -- Exercise reasonable diligence, care, and skill
• Conflict of Interest Obligation -- Establish policies to identify and mitigate conflicts
• Compliance Obligation -- Establish policies reasonably designed to comply with Reg BI

Customer Profile Factors

When determining suitability, consider these factors:

Suitability Quick Reference

Exam Trap: The question may describe a customer profile and ask which investment is MOST suitable or LEAST suitable. Read the customer's objective, time horizon, and risk tolerance carefully. The answer must match ALL factors, not just one.

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Municipal Bonds

Municipal bonds ("munis") are heavily tested on the Series 7. Know the types, tax treatment, and key calculations.

GO Bonds vs. Revenue Bonds

Tax Treatment of Municipal Bonds

Tax-Equivalent Yield (TEY) Formula

This is a must-know formula. It allows you to compare a tax-free municipal bond to a taxable bond:

$\text{Tax-Equivalent Yield} = \frac{\text{Municipal Bond Yield}}{1 - \text{Tax Bracket}}$

Example:

• Municipal bond yield: 4%
• Investor's tax bracket: 32%
• TEY = 4% / (1 - 0.32) = 4% / 0.68 = 5.88%

This means the investor would need a taxable bond yielding at least 5.88% to match the after-tax return of the 4% muni bond.

When Are Munis Suitable? Municipal bonds are most suitable for investors in high tax brackets. The higher the tax bracket, the greater the tax benefit. They are generally NOT suitable for tax-deferred accounts like IRAs (since the tax exemption is wasted).

Accrued Interest on Municipal Bonds

Municipal bonds use a 30/360 day count convention (assume 30 days per month, 360 days per year).

$\text{Accrued Interest} = \text{Par Value} \times \text{Coupon Rate} \times \frac{\text{Days Since Last Payment}}{360}$

Key Points:

• The buyer pays accrued interest to the seller
• Settlement is T+1 for regular-way trades
• Count from the last interest payment date up to (but NOT including) the settlement date
• Municipal bonds settle regular-way on T+1

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Debt Securities (Bonds)

Bond Pricing

Bonds are quoted as a percentage of par value ($1,000):

Yield Calculations

Understanding the relationship between yields is critical:

$\text{Coupon Rate (Nominal Yield)} = \frac{\text{Annual Coupon Payment}}{\text{Par Value}}$

$\text{Current Yield (CY)} = \frac{\text{Annual Coupon Payment}}{\text{Current Market Price}}$

$\text{Yield to Maturity (YTM)} \approx \frac{\text{Annual Coupon} + \frac{\text{Par} - \text{Price}}{\text{Years to Maturity}}}{\frac{\text{Par} + \text{Price}}{2}}$

$\text{Yield to Call (YTC)} \approx \frac{\text{Annual Coupon} + \frac{\text{Call Price} - \text{Price}}{\text{Years to Call}}}{\frac{\text{Call Price} + \text{Price}}{2}}$

The Yield Seesaw: Price vs. Yield Relationship

Critical Rule: Bond prices and yields move in opposite directions. When interest rates rise, bond prices fall. When interest rates fall, bond prices rise.

Example -- Current Yield:

• Bond: 6% coupon, par $1,000, trading at $900
• Current Yield = $60 / $900 = 6.67%

Example -- Approximate YTM:

• Bond: 6% coupon, 10 years to maturity, trading at $900
• YTM ≈ ($60 + ($1,000 - $900) / 10) / (($1,000 + $900) / 2)
• YTM ≈ ($60 + $10) / $950 = $70 / $950 = 7.37%

Duration and Interest Rate Risk

Exam Tip: Zero-coupon bonds have the most interest rate risk because their duration equals their maturity. They make no periodic payments, so all value is in the single payment at maturity.

Types of Bonds to Know

Convertible Bond Formulas

$\text{Conversion Ratio} = \frac{\text{Par Value}}{\text{Conversion Price}}$

$\text{Parity Price of Stock} = \frac{\text{Market Price of Bond}}{\text{Conversion Ratio}}$

$\text{Parity Price of Bond} = \text{Market Price of Stock} \times \text{Conversion Ratio}$

Example:

• $1,000 par bond convertible at $50
• Conversion Ratio = $1,000 / $50 = 20 shares
• If bond trades at $1,100: Parity stock price = $1,100 / 20 = $55
• If stock trades at $52: Parity bond price = $52 x 20 = $1,040

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Margin Accounts

Regulation T (Reg T) -- Initial Margin

Long Margin Account Formulas

$\text{Debit Balance} = \text{Market Value} - \text{Equity}$

$\text{Equity} = \text{Market Value} - \text{Debit Balance}$

$\text{Equity \%} = \frac{\text{Equity}}{\text{Market Value}}$

Margin Call (Long Account)

A margin call is triggered when equity drops below the maintenance requirement:

$\text{Margin Call Price} = \frac{\text{Debit Balance}}{1 - \text{Maintenance Margin \%}}$

For 25% maintenance:

$\text{Margin Call Price} = \frac{\text{Debit Balance}}{0.75}$

Example:

• Buy $20,000 worth of stock on margin
• Deposit: $10,000 (50% Reg T), Debit Balance: $10,000
• Margin Call Price = $10,000 / 0.75 = $13,333.33 (total market value)
• If stock purchased at $20/share (1,000 shares): Call at $13,333 / 1,000 = $13.33/share

Short Margin Account Formulas

$\text{Credit Balance} = \text{Short Market Value} + \text{Equity (Margin Deposit)}$

$\text{Equity} = \text{Credit Balance} - \text{Short Market Value}$

Margin Call (Short Account)

$\text{Margin Call Price (Short)} = \frac{\text{Credit Balance}}{1 + \text{Maintenance Margin \%}}$

For 30% maintenance:

$\text{Margin Call Price (Short)} = \frac{\text{Credit Balance}}{1.30}$

Special Memorandum Account (SMA)

• SMA is a line of credit in a margin account
• Created when excess equity builds up
• SMA increases when: market value rises (long), securities are deposited, dividends/interest received
• Buying Power = SMA x 2 (for Reg T at 50%)
• SMA does NOT decrease when market value declines -- it is a one-way ratchet
• Using SMA creates additional debit balance (increases loan)

Exam Trap: SMA is NOT equity. It is a line of credit. A customer can have SMA even if their account is below initial margin, as long as they are above maintenance margin.

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Taxation

Capital Gains

Cost Basis Methods

Wash Sale Rule

If you sell a security at a loss and buy a substantially identical security within 30 days before or after the sale:

• The loss is disallowed for tax purposes
• The disallowed loss is added to the cost basis of the new shares
• The holding period of the old shares is added to the new shares

The 61-day window: 30 days before the sale + the sale date + 30 days after the sale

Example: You buy 100 shares of ABC at $50. You sell them at $40 (a $10/share loss). You buy 100 shares of ABC back at $42 within 30 days. The $10 loss is disallowed, and your new cost basis becomes $42 + $10 = $52.

Tax Treatment of Different Securities

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Key Formulas -- Master Reference Table

Memorize every formula in this table:

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Other Must-Know Topics

Investment Company Products

Mutual Fund Pricing:

$\text{NAV} = \frac{\text{Total Assets} - \text{Total Liabilities}}{\text{Shares Outstanding}}$

$\text{Public Offering Price (POP)} = \frac{\text{NAV}}{1 - \text{Sales Charge \%}}$

$\text{Sales Charge \%} = \frac{\text{POP} - \text{NAV}}{\text{POP}} \times 100$

Mutual Fund Share Classes

Breakpoint Reminder: Breakpoint sales (selling just below a breakpoint to earn a higher commission) is a violation. Always inform customers about breakpoint discounts and Rights of Accumulation (ROA).

Retirement Accounts

Customer Account Types

Anti-Money Laundering (AML)

Communications with the Public

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Exam Day Tips

Time Management

• 225 minutes / 130 questions = ~1.73 minutes per question (including unscored)
• Do NOT spend more than 2 minutes on any single question
• Flag difficult questions and come back to them
• You will likely finish with time to spare if you keep pace

Question Strategy

1. Read the LAST sentence first -- that's what they're actually asking
2. Eliminate obviously wrong answers -- usually 2 can be eliminated immediately
3. Watch for absolutes -- "always," "never," "all," "none" are usually wrong
4. Look for the BEST answer -- multiple options may seem correct, pick the MOST correct
5. Customer profile questions -- match age + objective + risk tolerance + time horizon
6. Options questions -- draw a T-chart (Money In vs. Money Out) for every options problem
7. "Except" and "Not" questions -- circle the negative word so you don't miss it
8. Bond questions -- remember the inverse relationship between price and yield

The T-Chart Method for Options

For every options question, draw this:

• If Money IN > Money OUT = Profit
• If Money OUT > Money IN = Loss

This one technique will help you answer nearly every options question correctly. Practice it until it becomes automatic.

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Ready to Practice?

This cheat sheet gives you every formula and concept, but you need to practice applying them under timed conditions. The more questions you complete, the more confident you'll be on exam day.

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Frequently Asked Questions

What score do I need to pass the Series 7?

You need a score of 72% (90 correct out of 125 scored questions). There are also 5 unscored pretest questions mixed in, so you'll answer 130 total questions but only 125 count toward your score.

What is the hardest topic on the Series 7?

Options strategies are widely considered the most difficult topic. They require understanding max gain, max loss, breakeven calculations, and when each strategy is suitable. Options-related questions can appear throughout all four job functions.

Can I use a calculator on the Series 7?

No personal calculators are allowed. A basic on-screen calculator is provided at the testing center. Practice mental math and estimation techniques for bond yields and options calculations.

How is the Series 7 different from the SIE?

The SIE is a prerequisite co-requisite that covers broad industry knowledge. The Series 7 is more in-depth and focuses specifically on recommending and trading securities products. The Series 7 goes much deeper into options, bonds, suitability, and margin -- topics the SIE only introduces.

How many times can I retake the Series 7?

If you fail, you must wait 30 days before your second attempt, 30 days before your third attempt, and 180 days for any subsequent attempts. There is no limit on the number of retakes, but waiting periods apply.