Series 7 practice questioneasyOptions — Exercise by Exception
The OCC's exercise-by-exception rule automatically exercises options that expire in-the-money by at least:
- A$0.01✓ Correct answer
- B$0.05
- C$0.25
- D$1.00
Explanation
Why A — $0.01
Under the OCC's exercise-by-exception rule, options that are in-the-money by $0.01 or more at expiration are automatically exercised unless the holder provides contrary instructions. This ensures that valuable options are not inadvertently allowed to expire worthless. Holders must notify their broker if they do not want automatic exercise.
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
- An investor buys a put with a higher strike price and writes a put with a lower strike price, both with the same…
- An investor who writes a deep in-the-money covered call on stock held for 10 months may face which tax consequence?
- What is the maximum loss for a long straddle?
- An investor writes 5 covered ABC Jul 50 calls at $3 each. The stock was purchased at $47. At expiration, ABC is at $55…