Options & Derivatives Flashcards
6 cards from real Series 7 – General Securities Representative Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Options & Derivatives flashcards as text
An investor writes 1 uncovered (naked) call option. What is their maximum potential loss?
Answer: Unlimited
The seller of a naked call faces unlimited loss because the stock price can theoretically rise without limit.
What is a 'straddle' in options trading?
Answer: Buying both a call and a put on the same stock with the same strike price and expiration
A straddle involves buying both a call and a put with identical strike prices and expiration dates, profiting from large price moves in either direction.
What is the intrinsic value of a call option with a strike price of $45 when the stock is trading at $50?
Answer: $5
Intrinsic value of a call = Stock price - Strike price = $50 - $45 = $5.
Under Series 7 rules, which document must be provided to a customer before or at the time of opening an options account?
Answer: Options Disclosure Document (ODD)
The Options Disclosure Document (ODD), titled 'Characteristics and Risks of Standardized Options,' must be provided before or at the time a customer's options account is approved.
An investor buys a put option with a $60 strike price and pays a $4 premium. What is the breakeven point at expiration?
Answer: $56
Breakeven for a long put = Strike price - Premium = $60 - $4 = $56.
What is time value in options pricing?
Answer: The portion of the option premium above its intrinsic value
Time value is the portion of the premium that exceeds intrinsic value, reflecting the probability of the option gaining value before expiration.
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Sources & references
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- finra.org — Eligibility, fees, passing score, score validity, test dates, retake policy, score release, exam format, exam information · verified Oct 2026
- prometric.com — Test delivery · verified Oct 2026