Series 7: Options UPDATED Exam
Questions and CORRECT Answers
If an equity call holder exercises a contract, the holder must deliver:
A. cash in 1 business day
B. stock in 1 business day
C. cash in 2 business days
D. stock in 2 business days - CORRECT ANSWER - C. cash in 2 business days
The holder of a call on a listed stock exercises. The holder must:
I deliver stock
II deliver cash
III take delivery of stock
IV take delivery of cash - CORRECT ANSWER - C. II and III- Deliver cash & take
delivery of stock
If the writer of an equity call contract is exercised, the writer must deliver:
A. cash in 1 business day
B. stock in 1 business day
C. cash in 2 business days
D. stock in 2 business days - CORRECT ANSWER - D. stock in 2 business days
A customer would sell call contracts because the customer:
A. is bullish on the underlying security
B. is bearish on the underlying security
,C. wishes to generate earned income
D. wishes to defer taxation of gains on the underlying stock - CORRECT ANSWER - B. is
bearish on the underlying security
A customer would buy put contracts because the customer:
A. is bullish on the underlying security
B. is bearish on the underlying security
C. is neutral on the underlying security
D. wishes to generate ordinary income - CORRECT ANSWER - B. is bearish on the
underlying security
An investor purchases 1 ABC Jan 45 Put @ $3. The investor subsequently exercises his option
contract. The holder has the right to:
A. buy stock at $42 per share
B. buy stock at $45 per share
C. sell stock at $42 per share
D. sell stock at $45 per share - CORRECT ANSWER - D. sell stock at $45 per share
An investor writes 1 ABC Jan 45 Put @ $3. The contract subsequently is exercised. The writer is
obligated to:
A. buy stock at $42 per share
B. buy stock at $45 per share
C. sell stock at $42 per share
, D. sell stock at $45 per share - CORRECT ANSWER - B. buy stock at $45 per share
A customer would sell put contracts because the customer:
A. is bullish on the underlying security
B. is bearish on the underlying security
C. wishes to generate ordinary income
D. wishes to defer taxation of gains on the underlying stock - CORRECT ANSWER - A. is
bullish on the underlying security
The premium on a call or put option is the:
A. exercise price of the contract
B. cost of the contract
C. market price of the underlying instrument
D. cost of the underlying instrument - CORRECT ANSWER - B. cost of the contract
The "cost" of an option contract is the:
A. premium
B. exercise price
C. market price of the underlying security
D. intrinsic value - CORRECT ANSWER - A. premium
The option premium is:
Questions and CORRECT Answers
If an equity call holder exercises a contract, the holder must deliver:
A. cash in 1 business day
B. stock in 1 business day
C. cash in 2 business days
D. stock in 2 business days - CORRECT ANSWER - C. cash in 2 business days
The holder of a call on a listed stock exercises. The holder must:
I deliver stock
II deliver cash
III take delivery of stock
IV take delivery of cash - CORRECT ANSWER - C. II and III- Deliver cash & take
delivery of stock
If the writer of an equity call contract is exercised, the writer must deliver:
A. cash in 1 business day
B. stock in 1 business day
C. cash in 2 business days
D. stock in 2 business days - CORRECT ANSWER - D. stock in 2 business days
A customer would sell call contracts because the customer:
A. is bullish on the underlying security
B. is bearish on the underlying security
,C. wishes to generate earned income
D. wishes to defer taxation of gains on the underlying stock - CORRECT ANSWER - B. is
bearish on the underlying security
A customer would buy put contracts because the customer:
A. is bullish on the underlying security
B. is bearish on the underlying security
C. is neutral on the underlying security
D. wishes to generate ordinary income - CORRECT ANSWER - B. is bearish on the
underlying security
An investor purchases 1 ABC Jan 45 Put @ $3. The investor subsequently exercises his option
contract. The holder has the right to:
A. buy stock at $42 per share
B. buy stock at $45 per share
C. sell stock at $42 per share
D. sell stock at $45 per share - CORRECT ANSWER - D. sell stock at $45 per share
An investor writes 1 ABC Jan 45 Put @ $3. The contract subsequently is exercised. The writer is
obligated to:
A. buy stock at $42 per share
B. buy stock at $45 per share
C. sell stock at $42 per share
, D. sell stock at $45 per share - CORRECT ANSWER - B. buy stock at $45 per share
A customer would sell put contracts because the customer:
A. is bullish on the underlying security
B. is bearish on the underlying security
C. wishes to generate ordinary income
D. wishes to defer taxation of gains on the underlying stock - CORRECT ANSWER - A. is
bullish on the underlying security
The premium on a call or put option is the:
A. exercise price of the contract
B. cost of the contract
C. market price of the underlying instrument
D. cost of the underlying instrument - CORRECT ANSWER - B. cost of the contract
The "cost" of an option contract is the:
A. premium
B. exercise price
C. market price of the underlying security
D. intrinsic value - CORRECT ANSWER - A. premium
The option premium is:
