Finra Series-7 Exam - Topic 7 Question 25 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 25
Topic #: 7

In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600.

If the option expires without being exercised, how is the premium expense treated by Bubba?

Aas a $600 capital loss

Bas a $600 capital gain

C$600 is added to his acquisition cost for the stock

D$600 is held in abeyance until the stock is eventually sold

Show Suggested Answer

Suggested Answer: A

a $600 capital loss. The amount of premium paid is the cost and the recovery is zero, resulting in a $600 capital loss.

by Jina at May 06, 2022, 04:16 PM

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Audria

4 months ago

I disagree, it should be treated as a capital gain.

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Vivan

4 months ago

Surprised this isn't more straightforward!

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Tamera

4 months ago

I think it adds to the acquisition cost, right?

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Roxane

4 months ago

Definitely a capital loss, no doubt about it!

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Cherri

5 months ago

The premium is a sunk cost if the option expires.

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Kiera

5 months ago

I think it’s option C, where the $600 is added to the acquisition cost. That seems to make sense based on what we studied about options.

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Kirk

5 months ago

I remember practicing a similar question where the premium was added to the acquisition cost, but I can't recall if that applies here too.

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Ronald

5 months ago

I think the premium is treated as a capital loss, but I'm not entirely sure if it counts as a $600 loss or something else.

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Yolande

5 months ago

I feel like the premium just disappears if the option expires, but does that mean it’s a capital loss? I’m confused about how that works.

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Lai

5 months ago

Hmm, this one seems a bit tricky. I'll need to think it through carefully.

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Ettie

5 months ago

I think I've seen questions like this before; isn't an alias record often recommended for pointing to an Application Load Balancer?

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Francesco

5 months ago

I'm pretty sure the answer is B. If the SWI= statement is invalid, the switch should just load the first SWI image it finds on the flash.

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