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A covered call position is:Question 3Select one:a.the purchase of a share at the same time as selling a put on that share.b.the simultaneous purchase of a call and the underlying asset.c.selling a share short at the same time as selling a call on that share.d.the purchase of a share at the same time as selling a call on that share.Clear my choice

Question

A covered call position is:Question 3Select one:a.the purchase of a share at the same time as selling a put on that share.b.the simultaneous purchase of a call and the underlying asset.c.selling a share short at the same time as selling a call on that share.d.the purchase of a share at the same time as selling a call on that share.Clear my choice

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Solution

The correct answer is:

d. the purchase of a share at the same time as selling a call on that share.

This is known as a covered call position. In this strategy, you own the underlying stock and sell a call option on that stock. This is done with the hope that the stock will not rise above the strike price, and the call will expire worthless, allowing you to keep the premium from selling the call.

Similar Questions

Which of the following doesn't result in the closing of a long call option position?a.purchasing a put with the same expiration, strike, and underlying asset.b.letting the call go off-line.c.selling a call with the same underlying asset, strike price, and expiration.d.putting the call to use.

A ________ option is an option to purchase a specified number of shares on or before some future date at a specified price, whereas a _______ option is an option to sell a specified number of shares on or before some future date at a specified price. ______ are bought if the share is expected to rise.Question 1Select one:a.put; call; Putsb.call; put; Putsc.call; put; Callsd.put; call; Calls

.What is the difference between a call option and a put option?*1 pointa. A call option gives the holder the right to buy an underlying asset, while a put option gives the holder the right to sell an underlying asset.b. A call option gives the holder the right to sell an underlying asset, while a put option gives the holder the right to buy an underlying asset.c. A call option and a put option are the same thing.d. A call option and a put option have no relation to buying or selling an underlying asset

A call option gives the holder____a.the obligation to buy somethingb.the right to sell somethingc.the right to buy somethingd.the obligation to sell somethinge.None of the Above

A is a type of option that permits the owner to sell an asset at a later time.a.Forward optionb.The put optionc.A future agreementd.Call option

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