Series 7 Exam Question 100: Answer and Explanation

Question: 100

An investor sold 1 XYZ Oct 35 put at 7. Two weeks prior to expiration with XYZ trading at 33, the investor bought 1 XYZ Oct 35 put at 3. The second transaction would be called a(n)

• A. opening purchase
• B. opening sale
• C. closing purchase
• D. closing sale

Correct Answer: C

Explanation:

C. When the investor sold the option initially, it was an opening sale. Two weeks prior to expiration, the investor decided to close themselves out of that position, so the second transaction is a closing purchase because they had to buy the option to close out the position.