Series 7 practice questionhardOptions — Bear Call Spread Breakeven
An investor writes 1 DEF Aug 55 call at $7 and buys 1 DEF Aug 65 call at $2. What is the breakeven point?
- A$57
- B$60✓ Correct answer
- C$62
- D$63
Explanation
Why B — $60
Net credit received = $7 - $2 = $5. Breakeven for a bear call spread = lower strike + net credit = $55 + $5 = $60. At $60, the short call has $5 of intrinsic value ($60 - $55), which exactly equals the net credit received. Above $60, the position loses money up to the maximum loss.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 755+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Investment Information & Recommendations questions
- Compared to a covered call strategy, a protective put strategy provides:
- A diagonal spread combines elements of which two types of spreads?
- An investor writes 1 JKL Mar 40 call at $3 and writes 1 JKL Mar 40 put at $2. What are the breakeven points?
- A vertical spread involves options with the same underlying and expiration but different: