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FINRA Series 7

Category - Series 7

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Bubba buys one XYZ June 40 call for $1,000 and sells one XYZ March 40 call for $600. Subsequently, the June call is closed for $1,200 and the March call for $900. What is Bubba’s net result?

$100 loss
$100 profit
$200 loss
$200 profit

Explanation

Answer: A - $100 profit. The long position in the June call is a $200 profit ($1,200 - $1,000). The short position in the March call is a $300 loss ($900 - $300). Combining the gain and loss results in a $100 loss.

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