Series 7 Exam Question 83: Answer and Explanation

Question: 83

Declan wrote an XYZ August 30 call for 7. What is Declan's maximum potential gain?

• A. $700
• B. $5,300
• C. $6,700
• D. Unlimited

Correct Answer: D

Explanation:

D. When selling an option with no underlying stock position, the maximum gain is the premium received. Declan sold the option for 7, so his maximum potential gain (if the option never goes in the money) is $700 ($7 × 100 shares per option).