Finra Exam Series-7 Topic 7 Question 40 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 40
Topic #: 7

Bubba buys one XYZ September 50 call at $7 and sells one XYZ September 60 call at $3. At that time, XYZ stock is at $55. Bubba has no other stock positions. At what must XYZ trade for Bubba to break even?

A$54

B$55

C$57

D$60

Show Suggested Answer

Suggested Answer: A

$54. Bubba's position is a bullish spread. The breakeven is determined by adding the debit amount to the lower strike price. The debit amount is $4 ($7 - $3). Adding that to $50 equals $54.

by Casie at May 07, 2022, 11:15 PM

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