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Finra Series-7 Exam - Topic 1 Question 10 Discussion

In mid-September, Bubba sells one XYZ February 50 call at $6. It subsequently expires without being exercised.How is the premium taxed?
B) the $600 premium is a capital gain
A) Bubba's cost of the underlying stock is reduced
C) the $600 premium constitutes ordinary income
D) the $600 premium is rolled over into another XYZ call with the next longest expiration date

Finra Series-7 Exam - Topic 1 Question 10 Discussion

Actual exam question for Finra's Series-7 exam
Question #: 10
Topic #: 1
[All Series-7 Questions]

In mid-September, Bubba sells one XYZ February 50 call at $6. It subsequently expires without being exercised.

How is the premium taxed?

Show Suggested Answer Hide Answer
Suggested Answer: B

the $600 premium is capital gain. That's simply how the tax law works.


by Leatha at May 07, 2022, 12:33 AM

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Lindsey
8 months ago
Nope, it’s definitely ordinary income.
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Beata
9 months ago
Really? I always thought it was rolled over into another option.
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Hubert
9 months ago
Wait, I thought it could be a capital gain?
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Annabelle
9 months ago
Totally agree, it’s taxed as ordinary income!
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France
9 months ago
The premium is considered ordinary income.
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Ora
9 months ago
I vaguely recall that if the option expires, the premium is taxed as ordinary income, which aligns with option C. That makes sense, right?
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Noel
9 months ago
I feel like I read that the premium reduces the cost basis of the stock, but that was for a different scenario. This one seems tricky.
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Lura
9 months ago
I think I practiced a question like this where the premium was considered ordinary income if the option expired worthless. So, maybe it's C?
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Nidia
9 months ago
I remember something about premiums being treated differently depending on whether the option is exercised or not, but I'm not entirely sure how that applies here.
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Gregoria
9 months ago
This seems like a pretty standard content slot setup. As long as the slot is properly enabled and scheduled, I don't see any reason why the content wouldn't render correctly. I'm going to go with option A.
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Julianna
10 months ago
I remember we discussed how unrealistic targets can demotivate employees, so I'm not sure if making it tougher will actually help morale.
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Lizette
10 months ago
I think the answer is Urgent Change. Service improvements and system lifecycle management are more proactive, planned changes, whereas an urgent change would be something that needs to be addressed quickly and incorporated into the Service Management plan.
upvoted 0 times
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