An investor bought 100 shares of IBM at $150 each and sold 3-month call options on 100 shares of IBM at a strike price of $160. She received a premium of $2,000. Draw the payoff diagram for this position when the call option expires for IBM stock prices ranging from 130 to 170 in increments of $5. What might be the logic for this transaction?

Answer rating: 100% (QA)

When the call option expires the investor will have the following payoff ... View the full answer