Products & RisksQuestion 34 of 125
An investor buys 1 XYZ 50 call for 5 and sells 1 XYZ 60 call for 2. What is the maximum gain on this spread?
a.$300
b.$700
c.$1,000
d.Unlimited
Explanation
This is a debit call spread with a net debit of 3 points ($5 paid minus $2 received). Maximum gain equals the difference in strikes minus the net debit: (60 - 50) - 3 = 7 points, or $700, realized if the stock is at or above 60 at expiration.
Practice all 125 questions free — no signup required.
Related questions on this topic
- An investor buys 1 XYZ put with a 40 strike for a premium of 2. What is the maximum gain on this long put?
- An investor buys 1 XYZ put with a 40 strike for a premium of 2. What is the breakeven point at expiration?
- An investor who is bullish on a stock but wants to limit the cost of the position could establish a:
- Using the same spread (buy 1 XYZ 50 call for 5, sell 1 XYZ 60 call for 2), what is the maximum loss?
- A long straddle consists of:
- An investor buys 1 XYZ 50 call for 4 and 1 XYZ 50 put for 3 (a long straddle). What are the two breakeven points?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against FINRA Series 7 General Securities Representative Exam · How we review