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Series 7 — Options Strategies & Math flashcards

10 of 65 cards free to study here · 9 topics · the whole deck is built into Willys

Breakeven, maximum gain and loss for single options, covered and protective positions, straddles and spreads, plus index options, OCC exercise and assignment, and options account rules.

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Learn deck · part of FINRA SIE and Series 7 · written against: FINRA content outlines; T+1 settlement (May 2024); SECURE 2.0 RMD ages. Updated 2026-10-10.

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  1. In any option trade, which side pays the premium and holds a right, and which side receives the premium and takes on an obligation?
    The buyer (holder) pays the premium and gets the right to exercise; the seller (writer) receives the premium and is obligated to perform if assigned.
    Options Basics
  2. XYZ is at 48. Is a 50 call in, at, or out of the money? What about a 50 put?
    The 50 call is out of the money (strike above market); the 50 put is in the money by 2.
    Options Basics
  3. A customer buys 1 XYZ Jan 50 call for 3. What are the breakeven, maximum loss and maximum gain?
    Breakeven 53 (strike + premium), maximum loss 300 dollars (the premium), maximum gain unlimited.
    Long Calls and Puts
  4. A customer writes 1 uncovered XYZ 60 call for 4. What are the breakeven, maximum gain and maximum loss?
    Breakeven 64, maximum gain 400 dollars (the premium), maximum loss unlimited.
    Short Calls and Puts
  5. A customer owns 100 XYZ bought at 50 and writes 1 XYZ 55 call for 2. What are the breakeven, maximum gain and maximum loss?
    Breakeven 48 (cost − premium), maximum gain 700 dollars (55 − 50 + 2), maximum loss 4,800 dollars if the stock goes to zero.
    Covered and Hedged Positions
  6. A customer buys 1 XYZ 50 call for 3 and 1 XYZ 50 put for 2. What are the breakevens and maximum loss?
    A long straddle: breakevens 45 and 55 (strike ± total premium of 5) and maximum loss 500 dollars; maximum gain is unlimited on the upside.
    Straddles and Combinations
  7. What defines an options spread, and what distinguishes vertical, horizontal and diagonal spreads?
    Buying and selling the same type of option (both calls or both puts) on the same underlying. Vertical (price): different strikes; horizontal (calendar): different expirations; diagonal: both differ.
    Spreads
  8. How is a broad-based index option settled when exercised?
    In cash — the writer pays the difference between the index's settlement value and the strike, times the multiplier (100); no securities change hands.
    Index Options
  9. What is the difference between American-style and European-style options?
    American-style options may be exercised any time up to expiration; European-style only at expiration. Listed equity options are American-style.
    Exercise and Assignment
  10. Who must approve a customer's account for options trading?
    A registered options principal or a general securities sales supervisor, based on the customer's financial information, experience and objectives.

    Watch out: a branch office manager who is neither may also approve, but one of them must then approve the account within 10 business days.
    Accounts and Rules

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About these cards

Review status: Second-reader reviewed, with corrections applied.

Checked against:

  • Checked against the FINRA Series 7 content outline (© 2025 FINRA; topic list only; no text copied).
  • Checked against the OCC's Characteristics and Risks of Standardized Options and OCC exercise-by-exception procedures (reference only).
  • Checked against FINRA Rule 2360 (options) and Cboe product specifications for index option style and settlement (reference only).

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