Finra Exam Series-7 Topic 7 Question 25 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 25
Topic #: 7

In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600.

If the option expires without being exercised, how is the premium expense treated by Bubba?

Aas a $600 capital loss

Bas a $600 capital gain

C$600 is added to his acquisition cost for the stock

D$600 is held in abeyance until the stock is eventually sold

Show Suggested Answer

Suggested Answer: A

a $600 capital loss. The amount of premium paid is the cost and the recovery is zero, resulting in a $600 capital loss.

by Jina at May 06, 2022, 04:16 PM

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