If you need a Series 7 options tutor, you’re not the only one. It’s no secret that this section is the hardest of all. I get more requests for help with the options section than all other sections combined.
What Can a Series 7 Options Tutor Help With?
Make sure you have the basics under control. Do you know exactly what it means to own a call, or a put? This topic can get very complex, very quickly. A Series 7 options tutor will help you build your foundation. Eventually you should start to understand that the relationships that exist in the options world is all about opposites. For practical purposes, a “call” is the opposite of a “put”, and being “long” is the opposite of being “short.”
- Long Call: The buyer of a long call owns the rights to buy 100 shares of a specific stock at the agreed-upon strike price before expiration.
- Short Call: The writer (seller) of a call has the obligation to sell 100 shares of a specific stock at the agreed-upon strike price before expiration if the buyer exercises the option
For example: If you are long an ABC Oct 55 call at 2 then that means the investor bought a call that includes 100 shares of ABC stock which expires on the Saturday following the third Friday of October at 11:59pm EST. The strike price is $55 and the premium for the call is $2 per share.
- Long Put: The buyer of a long put owns the rights to sell 100 shares of a specific stock at the agreed-upon strike price before expiration.
- Short Put: The writer (seller) of a put has the obligation to buy 100 shares of a specific stock at the agreed-upon strike price before expiration if the buyer exercises the option.
That Isn’t So Hard…So What Gives?
By themselves, the concept behind options are not too complicated. When you start combining them into portfolio strategies is when a Series 7 options tutor comes in handy. Imagine when you are long a call, and short another call with a lower premium. This is an example of a “Debit Spread.” While inherently the concept is rather straightforward, the calculations can get tricky.
For example: Imagine being long an ABC Mar 45 call for 5, and short an ABC 50 call for 2. Remember that Debit Call Spreads are used to lower the cost of a long option position (the short position receives a premium and lowers the cost of the long position), and so ideally you want the spread to widen. For this reason your maximum gain in the above example will be:
- Max Gain = (50 – 45) – (5-2) = 2
When attempting the options section it’s important that you’re also aware of how to calculate your potential max losses and break-even points. For Debit Spread, these happen to be the cases:
- Maximum gain will be: Difference in strike prices – Difference in premiums
- Breakeven will be: Strike price of the long call + Difference in strike price
- Maximum Loss will be: Difference in premiums
For our examples this would result in:
- Breakeven = 45 + 3 = 48
- Max Loss = 5 – 2 = 3
Before I go too far down a rabbit hole, I’ll stop here. It’s not hard to see how difficult this section can get.
So, how hard is the Series 7 exam options section? It’s definitely the hardest section. A Series 7 options tutor will dramatically lower the study time you need! Save yourself the grueling task of feeling your way through the dark in options. I’m here to help!
Don’t have time to meet up? Check out my online series 7 tutor option!