Series 7 practice questionmediumOptions — Spread Identification
An investor buys 1 XYZ Jul 40 call and writes 1 XYZ Jul 50 call. This is which type of spread?
- ABear call spread
- BBull call spread✓ Correct answer
- CCalendar spread
- DDiagonal spread
Explanation
Why B — Bull call spread
This is a bull call spread (also called a debit call spread). The investor buys the lower strike call and writes the higher strike call, both with the same expiration. The position profits when the stock rises. The investor is net long (bullish) because the lower strike call is more expensive.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 758+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Investment Information & Recommendations questions
- As an option approaches expiration, what happens to its time value?
- An investor writes 1 QRS Mar 60 put at $7 and buys 1 QRS Mar 50 put at $2 (bull put spread). What is the maximum…
- What is the maximum gain for a writer of a call option?
- Compared to a long straddle, a long strangle has which of the following characteristics?
- What is the maximum gain for a writer of a put option?
- An investor buys 1 ABC Aug 40 put at $2 and buys 1 ABC Aug 50 call at $3 (long strangle). What are the breakeven points?
- An investor buys 100 shares of TUV at $40 and writes 1 TUV Jun 45 call at $3. What is the maximum loss?
- An investor owns 100 shares of DEF at $80, buys 1 DEF 75 put at $3, and writes 1 DEF 85 call at $3. What is the maximum…