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Finra Exam Series-7 Topic 1 Question 39 Discussion
Actual exam question for
Finra's
Series-7 exam
Question #: 39
Topic #: 1
[All Series-7 Questions]
Topic #: 1
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.
What is Bubba's maximum possible profit?
Suggested Answer:
B
$600. The maximum profit is the difference between strike prices less the debit amount. The debit amount is $4 ($7 - $3). The difference between strike prices is $10 ($60 - $50). Multiply the $6 difference by 100, which is the number of shares on one option.
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