Series 7 Exam Question 80: Answer and Explanation

Question: 80

Melissa R. purchased a JKL May 60 call for a premium of 5. What is the maximum potential gain?

• A. $500
• B. $5,500
• C. $6,500
• D. Unlimited

Correct Answer: D

Explanation:

D. When purchasing a call option with no other positions, the maximum potential gain is unlimited. Remember, call options go in the money when the price of the underlying security increases in value. And because there's no limit to the price of a security, the maximum potential gain in this case is unlimited.