Call Options
An investor owns 100 shares of ABC stock bought at $45 and writes an ABC 50 Call for $3. What is the maximum gain?
Covered call max gain = (Strike - Stock Cost) + Premium = ($50 - $45) + $3 = $8 x 100 = $800. If the stock rises above $50, shares are called away at $50, plus the $3 premium received.
Complete Analysis & Legal Rationale
Covered call max gain = (Strike - Stock Cost) + Premium = ($50 - $45) + $3 = $8 x 100 = $800. If the stock rises above $50, shares are called away at $50, plus the $3 premium received.
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.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described 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.