Series 7 Options Practice Questions
Options makes up 8 of every 50 questions on a Tigertest Series 7 practice test. Here are 10 of the 32 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on FINRA's Series 7 content outline. Original questions; 50 per test, weighted like the real 125-question exam, 72% to pass.
1. A customer buys 1 XYZ Jan 50 call at 3. The breakeven price on the stock is:
- A.$56
- B.$53
- C.$47
- D.$50
Answer: B. A long call breaks even at strike plus premium: 50 + 3 = $53. Strike minus premium ($47) is the breakeven for a put.
2. A customer buys 1 ABC Mar 40 put at 2.50. The maximum gain is:
- A.$250
- B.Unlimited
- C.$4,000
- D.$3,750
Answer: D. A long put gains most if the stock falls to zero: (40 - 2.50) x 100 = $3,750. Unlimited gain belongs to a long call.
3. A customer writes 1 uncovered DEF May 60 call at 4. The maximum loss is:
- A.Unlimited
- B.$400
- C.$5,600
- D.$6,400
Answer: A. A short naked call loses more as the stock rises, with no ceiling. The premium of $400 is the maximum gain.
4. A customer owns 100 shares bought at $45 and writes 1 Oct 50 call at 2. The maximum gain is:
- A.$200
- B.Unlimited
- C.$700
- D.$500
Answer: C. If the call is exercised, the stock goes at $50: (50 - 45) x 100 = $500 plus $200 premium = $700. The short call caps the upside.
5. A customer buys 100 shares at $70 and buys 1 70 put at 3. The breakeven is:
- A.$70
- B.$76
- C.$73
- D.$67
Answer: C. With a protective put, the stock must rise enough to cover the premium: 70 + 3 = $73. The maximum loss is the $300 premium.
6. A customer buys 1 GHI 50 call at 3 and 1 GHI 50 put at 2. The breakeven points are:
- A.$45 and $55
- B.$48 and $52
- C.$50 only
- D.$47 and $53
Answer: A. For a long straddle, add the combined premium of 5 to the strike and subtract it: 45 and 55. Using each premium separately gives 47 and 53.
7. A customer writes 1 JKL 40 call at 3 and writes 1 JKL 40 put at 2. The maximum gain is:
- A.Unlimited
- B.$300
- C.$200
- D.$500
Answer: D. A short straddle keeps both premiums, $500, if the stock is exactly 40 at expiration. The maximum loss on the call side is unlimited.
8. A customer buys 1 MNO 45 call at 5 and sells 1 MNO 50 call at 2. This position is a:
- A.Credit call spread, bullish
- B.Debit call spread, bullish
- C.Credit call spread, bearish
- D.Debit call spread, bearish
Answer: B. Paying more for the lower strike call than is received for the higher one is a net debit of 3. It profits when the stock rises and the spread widens.
9. In the spread long 1 MNO 45 call at 5, short 1 MNO 50 call at 2, the maximum gain is:
- A.$700
- B.$200
- C.$300
- D.$500
Answer: B. Maximum gain = difference in strikes minus net debit = (50 - 45) - 3 = 2 points, or $200. The $300 net debit is the maximum loss.
10. A customer sells 1 PQR 60 put at 5 and buys 1 PQR 55 put at 2. The breakeven is:
- A.$53
- B.$62
- C.$58
- D.$57
Answer: D. This is a bull put credit spread with a net credit of 3. Breakeven for a put spread is the higher strike minus the net premium: 60 - 3 = $57.
Practice all 32 options questions, and the rest of the 200-question bank, in the free Series 7 training sets. Questions you miss come back until you have mastered them.
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