Series 7 practice questioneasyOptions — Approval Levels
Which options strategy typically requires the highest level of account approval?
- ABuying calls
- BCovered call writing
- CWriting uncovered (naked) options✓ Correct answer
- DBuying protective puts
Explanation
Why C — Writing uncovered (naked) options
Writing uncovered (naked) options requires the highest approval level because of the potentially unlimited risk involved. Firms typically have multiple approval levels, with buying options and covered writing at lower levels, and uncovered writing at the highest level due to its significant risk profile.
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
- An investor buys 100 shares of JKL at $55 and buys 1 JKL Oct 50 put at $2. At expiration, JKL is at $62. What is the…
- The Options Clearing Corporation (OCC) serves which primary function?
- An investor buys 100 shares of MNO at $40 and buys 1 MNO Dec 35 put at $1.50. At expiration, MNO is at $28. What is the…
- An investor who buys stock and simultaneously buys a protective put exercises the put. How is the premium treated?
- PQR stock trades at $82. A PQR 85 call has a premium of $4. What is the time value of this option?
- When a call option is exercised, how is the premium treated for tax purposes for the buyer?
- An investor buys 3 XYZ Apr 55 calls at $4 each. At expiration, XYZ is at $65. What is the total profit?
- When a listed equity option expires unexercised, the premium paid by the buyer is treated for tax purposes as: