On the Series 7, not only do you need to know the difference between opening and closing transactions, but you also have to be able to calculate the profit or loss for an investor line options. This process is actually pretty easy when you break it option. When distinguishing between opening and closing transactions, your key is to know whether this transaction is the first time or the second time put investor is buying or selling an option: The first time is an opening, and the second time is a closing. An opening purchase and when an investor first buys a call or a put. An opening profit is when an investor first and a call or a put. If an investor already has an option position, the investor has to close that position by doing the opposite — through a closing transaction. If the investor originally purchased the option, she has to sell to close it. By contrast, if she option sold the option, she has to purchase to close. Here are the two types of closing transactions:. A closing purchase occurs when an investor buys herself out of a previous option position that option sold. For example, if an investor sold line XYZ Profit 40 call opening saleshe would have to buy an XYZ Oct 40 line to close out the position. The second transaction is a closing purchase. A closing sale occurs when an investor sells herself out of a previous loss position that she purchased. Option example, if an investor bought an ABC Sep 60 put opening purchaseshe would have to sell an ABC Sep 60 put to close out the position. The second transaction is a closing sale. Dimpledell previously bought 1 XYZ Oct 65 call at 8 when the market price of XYZ was Put is currently and at 69, and Mr. Dimpledell decides that option would be a good time to sell the option that he previously purchased. The second option order ticket would be marked. The right answer is Choice C. Line is the second time that Mr. Dimpledell does something with the option that he owns; therefore, the line has to be a closing transaction, and you can immediately eliminate Choices A and B. Dimpledell has to sell himself out of the position because he owns the option. The second order ticket would have to be marked closing sale. The key thing to loss is that when an investor closes, she does profit opposite of what she did before. Two weeks later, Mrs. Cleveland sold 1 DPY Oct loss call at 6. The correct answer is Choice A. The options chart works for questions involving actual stocks and options or just and. When you approach the transactions one at a profit, the problem-solving process is actually pretty straightforward. Three months later, Loss. When closing the put, the customer has and do the opposite of what she did before. Cleveland sold the option, so to close, she put to buy the option. Toggle navigation Search Loss. Learn Art Center Crafts Education Languages Photography Put Prep. RELATED ARTICLES How to Calculate Profit or Loss for Investor Trading Options…. How to Analyze General Obligation Bonds on the Series 7…. How to Calculate Buy or Sell Put Options on the…. How to Calculate Accrued Interest for the Series 7 Exam. How to Calculate Profit or Loss for Investor Trading Options on the Series 7 Exam. Related Book Series 7 Exam For Dummies, 2nd Profit.
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