Asked by julia James on Jun 02, 2024
Verified
A covered call position is
A) the simultaneous purchase of the call and the underlying asset.
B) the purchase of a share of stock with a simultaneous sale of a put on that stock.
C) the short sale of a share of stock with a simultaneous sale of a call on that stock.
D) the purchase of a share of stock with a simultaneous sale of a call on that stock.
E) the simultaneous purchase of a call and sale of a put on the same stock.
Covered Call
A combination of selling a call option together with buying the underlying asset.
Simultaneous Sale
A transaction where a selling and buying operation occurs at the same time, often used in financial strategies to mitigate risk.
Stock
Represents a share in the ownership of a company and entitles its holder to a claim on part of the company's assets and earnings.
- Explain option strategies such as covered calls and protective puts.
Verified Answer
ZK
Zybrea KnightJun 06, 2024
Final Answer :
D
Explanation :
A covered call position involves owning the underlying asset (in this case, a share of stock) and selling a call option on that same asset. This strategy is used to generate income from the option premium or to protect against a slight decline in the price of the underlying asset.
Learning Objectives
- Explain option strategies such as covered calls and protective puts.