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FINRA Series 7

Category - Series 7

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Bubba buys 100 shares of XYZ stock at $40 per share and sells a listed July XYZ call at 45 for a $2 premium. What is his loss potential?

$3,800
$4,000
$4,200
$4,500

Explanation

Answer: A - $3,800. If the stock declined to $0, Bubba would lose $4,000 from having purchased the stock less the $200 premium he received from selling the call option.

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