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Finra Series-7 Exam - Topic 3 Question 131 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 131
Topic #: 3

[All Series-7 Questions]

Which of the following situations is possible for a writer of a covered call option?

Abuying the underlying stock if the call is exercised

Bdepositing margin into his account

Cpurchasing a put option to hedge against unlimited loss potential

Dselling the security, he already owns

Show Suggested Answer

Suggested Answer: D

selling the security he already owns. A ''covered'' call is written on stock already owned.

by Carman at Aug 17, 2026, 04:20 PM

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Wei

4 days ago

I recall a practice question where we discussed the implications of selling the security we already own, which makes option D seem plausible for a covered call writer.

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Lilli

9 days ago

I'm not entirely sure about option C. I remember something about hedging, but can you really hedge against unlimited losses with a put when writing a covered call?

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Allene

14 days ago

I think option A makes sense because if the call is exercised, the writer has to deliver the stock, so buying it would be necessary.

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