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
A call option gives the buyer the right to:
Answer: Buy 100 shares at the strike price before expiration
A call option grants the holder the right, but not the obligation, to purchase 100 shares at the specified strike price before expiration.
An investor buys 1 XYZ call option with a $50 strike price, paying a $3 premium. At expiration, XYZ is trading at $55. What is the investor's profit?
Answer: $200
Profit = (Stock price - Strike price - Premium) × 100 = ($55 - $50 - $3) × 100 = $200.
What is the maximum loss for the buyer of a put option?
Answer: The premium paid
The maximum loss for an option buyer is limited to the premium paid, since the option simply expires worthless.
Which options strategy involves selling a call option on stock already owned?
Answer: Covered call
A covered call involves writing (selling) a call option on shares already held, generating premium income while capping upside potential.
What does 'in-the-money' mean for a put option?
Answer: The stock price is below the strike price
A put option is in-the-money when the underlying stock price is below the strike price, giving it intrinsic value.
What is the Options Clearing Corporation (OCC) primarily responsible for?
Answer: Acting as the guarantor and central clearinghouse for all listed options contracts
The OCC acts as the central counterparty and guarantor for all listed options trades, ensuring contract performance.
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Sources & references
Exam facts on this page (fees, format, dates, passing scores) are checked against these official sources; the date is our last check. Editorial policy
- 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