Series 7 Glossary

Curated for exam relevance

This glossary is intentionally focused on concepts that can change an answer choice. Each definition points toward the related topic page, chapter preview, or free practice drill.

Terms

• Revenue Bond. A revenue bond is a municipal bond backed primarily by income from a specific project, facility, or enterprise rather than the issuer's general taxing power.
• General Obligation Bond. A general obligation bond is a municipal bond backed by the issuer's full faith, credit, and taxing power, commonly including ad valorem property taxes.
• Covered Call. A covered call combines a long stock position with a short call on the same stock. The stock position covers the obligation to deliver shares if assigned.
• Protective Put. A protective put combines long stock with a long put on the same stock. The put gives the investor a floor by allowing the stock to be sold at the strike price.
• Breakpoint Sale. A breakpoint sale is a mutual fund sale made just below the dollar amount that would qualify the customer for a reduced front-end sales charge.
• Variable Annuity. A variable annuity is an insurance company contract whose value and payments can vary based on separate-account investment performance.
• Mutual Fund Breakpoint. A mutual fund breakpoint is a purchase-dollar level at which a Class A share front-end sales charge is reduced.
• Margin Call. A margin call is a demand for the customer to deposit cash or securities when an account does not meet an initial or maintenance margin requirement.
• Options Assignment. Options assignment is the process by which an option writer is selected to fulfill the obligation created by a short option contract.
• Suitability. Suitability is the requirement that a recommendation fit the customer's investment profile, including objectives, risk tolerance, time horizon, liquidity needs, tax status, financial situation, and experience.