Financial Industry Regulatory Authority (FINRA) Practice Exam 2026 - Free FINRA Practice Questions and Study Guide

To determine the break-even stock price in this scenario, we need to analyze the customer's positions and costs. The customer has purchased a put option with a strike price of $35 for a premium of $3, and they have also bought 100 shares of ABC stock at $35 each.

The break-even point for the investor occurs when the total loss from the put option is covered by the gain from the stock they own.

In this case, the premium paid for the put option is $3. This means that in order to break even, the stock price at expiration must cover the cost of the put and still match the strike price.

If the stock price is above $35, the put option will expire worthless, and they will manage a loss based on the $3 premium paid. Therefore, the effective cost basis for the stock after accounting for the premium paid on the put option is $35 (price of the stock per share) + $3 (the premium of the put) = $38.

Thus, the break-even stock price is indeed $38. At this point, the total investment (including the premium for the put) would be equal to the market price of the stock, allowing the investor to recoup their