SIE (Securities Industry Essentials) Practice Exam

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A transaction in which a writer covers a position by purchasing an option is called:

  1. A closing sale

  2. A closing purchase

  3. An opening sale

  4. An opening purchase

The correct answer is: A closing purchase

This option is the only action that involves purchasing an option, whereas the other options involve selling an option. In a closing purchase, the writer is buying an option to cover their position and close it, while in a closing sale, the writer is selling an option they already own to close their position. An opening sale involves selling an option to open a position, and an opening purchase involves buying an option to open a position. Therefore, the correct term for this transaction is a closing purchase.

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