Call Options
Which options position profits when the underlying stock price DECLINES?
Short call and long put are bearish. Short put and long call are bullish.
Complete Analysis & Legal Rationale
A short call (selling a call) profits when the stock price stays the same or declines. The call seller keeps the premium received if the option expires worthless (when the stock price is at or below the strike price at expiration).
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:
Long calls profit when prices rise above the strike plus premium.
Matches the verified teaching point in the explanation.
Long stock profits when prices rise.
Short puts profit when prices stay flat or rise.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA materials.