SIE practice questionhardSpreads
A bear call spread’s maximum loss occurs if:
- AStock closes at the lower strike price
- BStock falls below the lower strike price
- CStock remains between the strikes
- DStock rises above the higher strike price✓ Correct answer
Explanation
Why D — Stock rises above the higher strike price
Bear call spreads lose the most if the stock rises above both strikes, requiring shares to be delivered at a loss. B is max gain, C and D are not the worst case.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Options questions
- What is the breakeven point(s) for a long straddle with a $40 strike if each option is bought for $3?
- The maximum gain in a debit put spread is calculated as:
- If an option expires in the money but is not exercised, what happens?
- A trader simultaneously buys a March 50 call at $7 and sells a March 55 call at $3. What's the maximum profit per share?