Discuss Finra Series-7 Exam Topic 1 Question 17

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

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.

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12 comments · newest first

Fredric 1 year ago

Definitely $700, no doubt about it!

Queenie 1 year ago

Wait, how do you get $700? Seems off to me.

Tabetha 1 year ago

I thought the put would affect the profit too?

Asha 1 year ago

Yeah, so that's $700 minus the total cost!

Rory 1 year ago

The call's intrinsic value is $7, right?

Antonio 1 year ago

If the call is worth $7 and we paid $3 for it, that gives us a $4 profit, but then we lost $2 on the put. So, is it $200 or $300 total?

Holley 1 year ago

I'm a bit confused about how to handle the put since it expires worthless. Does that mean we just focus on the call's profit?

Avery 1 year ago

I remember a similar question where we had to calculate profits from both a call and a put. I think we need to subtract the premiums paid from the intrinsic value.

Carolynn 1 year ago

I think the call's intrinsic value is $7 since the stock is at $72, but I'm not sure how to factor in the costs.

Rueben 1 year ago

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Georgeanna 1 year ago

I'm not so sure about disabling SSLv3—there was something about vulnerabilities, but I can't recall the specifics.

Tyisha 1 year ago

I feel like there are multiple commands, but I can't remember if it's `New-UcsSession` or something else entirely.

Finra Series-7 Exam - Topic 1 Question 17 Discussion