The NASD Series 7 and Series 63 are the licensing tests that you must pass in order to become a stockbroker. However, before you're allowed to sit for the exams, you must first obtain sponsorship or employment from a NASD or exchange member firm. You must also submit a set of fingerprints and undergo a background check.

The Series 7 is a 6 hour, 250 multiple choice question exam taken in 2 3-hour sittings. There are actually 260 questions, but only 250 count towards your score, as the other 10 are experimental questions.

The exam covers the 6 following sections:
  • Advertising, Qualifying Customers, Industry Regulations
  • Securities Instruments
  • Handling Customer Accounts, Taxation, Margin
  • Securities Markets, Order Handling, Confirmations
  • Economics, Securities Analysis, Sources of Financial Information
  • Portfolio Analysis, Investment Strategies, Retirement Plans

  • A score of 70% is passing, and there is no penalty for guessing.

    Sample Question:
    Which of the following option positions would represent the most risk to a customer?
    a. Net debit spread
    b. Net credit spread
    c. Long call
    d. Short straddle

    D. The short straddle is a short call combined with a short put on the same underlying. This has the most risk because it has unlimited loss potential, i.e. if the underlying increases significantly, you must pay on margin.

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