Call Options
An investor buys an ABC 60 Call for $4. What is the maximum potential loss?
A long call buyer's maximum loss is limited to the premium paid. With a $4 premium x 100 shares = $400 maximum loss. This occurs if the option expires worthless.
Complete Analysis & Legal Rationale
A long call buyer's maximum loss is limited to the premium paid. With a $4 premium x 100 shares = $400 maximum loss. This occurs if the option expires worthless.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Governs options accounts, approvals, and related supervisory requirements (verify current text).
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.