Finra Exam Series-7 Topic 7 Question 101 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 101
Topic #: 7

Bubba buys one XYZ November 65 call at $3 and one XYZ November 65 put at $2. XYZ is trading at $72. The put expires and the call is closed at its intrinsic value.

What is the resulting profit?

A$200

B$300

C$500

D$700

Show Suggested Answer

Suggested Answer: A

$200. Since XYZ is trading at 72, a November 65 call has an intrinsic value of $700. A sale at that value compared to the cost of $300 is a profit of $400. Subtract the loss of $200 on the expired put to obtain the profit of $200.

by Bambi at Sep 16, 2024, 05:36 AM

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Domingo

2 months ago

Hold on, I'm still trying to figure out why Gilbert would buy both a call and a put on the same stock. Isn't that like betting against yourself? Ah well, the answer is probably B) $300.

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Pete

3 months ago

I reckon this one's a no-brainer. Ain't nothin' like a good ol' fashioned option play to make a quick buck. Y'all better believe the answer is C) $500!

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Vincent

2 months ago

Definitely, buying the call and put at those prices would result in a $500 profit.

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Tasia

2 months ago

Yeah, I agree. It's a simple calculation.

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Gail

2 months ago

I think the answer is C) $500.

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Ira

3 months ago

Hmm, let's see... If the put expires and the call is closed at intrinsic value, that means I need to calculate the difference between the call value and the put value. Looks like the answer is B) $300.

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