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Official Practice ProblemFINRA Series 7 Blueprint: Function 3
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Question #s7-prep2-s7-q-244Function 3Fundamental

Call Options

Which options are typically settled by physical delivery of the underlying security?

Correct Choice: C

Equity options = physical delivery. Index/VIX options = cash settlement.

Complete Analysis & Legal Rationale

Equity options on individual stocks are settled by physical delivery - the buyer receives (calls) or delivers (puts) 100 shares of the underlying stock. Index options use cash settlement.

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:

Choice AIncorrect
Concept Trap

S&P 500 Index options are cash-settled.

Choice BIncorrect
Concept Trap

VIX options are cash-settled.

Choice CCorrect
None

Matches the verified teaching point in the explanation.

Choice DIncorrect
Concept Trap

Currency index options are typically cash-settled.

Authorities & References:

Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.

Official SourceFINRA FINRA Series 7 Content Outline — General Securities Representative Examination (Series 7) Content Outline
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Regulatory Authority & Citations: Primary Legal Sources

Verified citations governing Question #s7-prep2-s7-q-244 (FINRA Series 7 Content Outline)

To pass the FINRA Series 7, candidates must understand not just the calculation formulas, but the exact federal securities acts, SRO rulebooks, and statutory frameworks that enforce them. Review the primary authority records below:

FINRAFINRA Series 7 Content Outline— General Securities Representative Examination (Series 7) Content Outline

Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.

Read FINRA Official Rule

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