A six-month call is the right to buy stock at $20. Currently, the stock is selling for $22, and the call is selling for $5. You buy 100 shares ($2,200) and sell one call (in other words, you receive $500).
a. Does this position illustrate covered or naked call writing?
b. If, at the expiration date of the call, the price of the stock is $29, what is your profit on the combined position?
c. If, at the expiration date of the call, the price of the stock is $19, what is your profit on the combined position?