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FINRA Series 7

Category - Series 7

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Bubba purchases 100 shares of XYZ at 78 and, on the same day, writes 1 XYZ October 80 call for a premium of 4. If the option expires unexercised, what is Bubba’s profit on the 100 shares of stock?

$200
$400
$600
cannot be determined

Explanation

Answer: D - cannot be determined. Since Bubba has not yet sold the stock, a profit cannot be determined on the stock. He has a $400 profit on the option.

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