Series 7 practice questioneasyOptions — Position Limits
Position limits for options apply to the number of contracts an investor can hold on:
- AA single exchange
- BThe same side of the market for the same underlying security✓ Correct answer
- CAll securities in a portfolio combined
- DA single expiration month
Explanation
Why B — The same side of the market for the same underlying security
Position limits restrict the number of option contracts an investor can hold on the same side of the market (bullish or bearish) for the same underlying security. Long calls and short puts are on the same side (bullish), as are long puts and short calls (bearish). These limits prevent market manipulation.
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