PracticeQuiz content is free on an ad-supported model.

Unfortunately, we can't support AdBlocker usage because of the impact on our servers. If you'd like to continue, please disable your adblcoker and reload page.

Thanks for understanding.

PracticeQuiz.com

Reload page

FINRA Series 7 Exam Prep Question List

2 In mid-September, Bubba sells one XYZ February 50 call at $6. It subsequently expires without being exercised. How is the premium taxed?
  1. Bubba’s cost of the underlying stock is reduced
  2. the $600 premium is a capital gain
  3. the $600 premium constitutes ordinary income
  4. the $600 premium is rolled over into another XYZ call with the next longest expiration date.
See Answer
3 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. In April, Bubba exercises the put option and uses his stock for delivery. What is his resulting tax consequence?
  1. a $600 capital loss
  2. neither profit nor loss
  3. cannot be determined without knowing the market price of XYZ upon exercise
  4. this is a wash sale and cannot be included in the investor’s tax calculations
See Answer