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
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
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