Options Strategies
A transaction where an option writer covers a position by purchasing an option is:
Writers open with sales, close with purchases. Buyers open with purchases, close with sales.
Complete Analysis & Legal Rationale
When an option writer (seller) wants to close their position, they must buy back the same option. This is called a closing purchase. An opening sale creates a short option position, while a closing purchase eliminates it. Buyers use closing sales to exit long positions.
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 concept in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing concept in the explanation.
Does not match the governing concept in the explanation.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA materials.