The polarized excitons and optical activity of single-wall carbon nanotubes (SWNTs) are studied theoretically by $\ensuremath{\pi}$-electron Hamiltonian and helical-rotational symmetry. By taking advantage of the symmetrization, the single-particle energy and properties of a SWNT are characterized with the corresponding helical band structure. The dipole-moment matrix elements, magnetic-moment matrix elements, and the selection rules can also be derived. Based on different selection rules, the optical transitions can be assigned as the parallel-polarized, left-handed circularly-polarized, and right-handed circularly-polarized transitions, where the combination of the last two gives the cross-polarized transition. The absorption and circular dichroism (CD) spectra are simulated by exciton calculation. The calculated results are well comparable with the reported measurements. Built on the foundation, magnetic-field effects on the polarized excitons and optical activity of SWNTs are studied. Dark-bright exciton splitting and interband Faraday effect in the CD spectrum of SWNTs under an axial magnetic field are predicted. The Faraday rotation dispersion can be analyzed according to the selection rules of circular polarizations and the helical band structure.