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FINRA Series 7

Category - Series 7

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At the time it underlying stock is trading at 48, Bubba buys a listed call option with a $50 strike price for $300. At what minimum price must that stock trade for Bubba to recover his investment (ignoring commission and taxes)?

Explanation

Answer: D - $53. The breakeven price on the call is the premium plus the strike price. Since the premium is $3 per share, the breakeven price is $53.

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