Series 7  General Securities Representative Exam
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A trader buys 500 shares of ABC stock at $50 a share and buys 5 ABC 45 puts @ 5.00 to hedge his position. What is the trader's maximum profit?
$45 a share
A
$2,500
B
unlimited
C
$5,000
D
Explanations
The profit potential is unlimited. The question does not specify what the profit is at expiration. The puts could expire worthless if ABC is above 45 at expiration and the trader would still have the 500 shares of stock. Therefore, the profit potential is unlimited
Pricing
Basic
Part of the questions for each course

 Course
 Questions

 SIE
 20 of 150

 Series 6
 30 of 500

 Series 7
 50 of 625