Question: answer in detail thanks Short Answer Question 3 ( 16 marks) CBA stock is currently trading at $75.8. Louise decides to write a covered call

answer in detail thanks Short Answer Question 3 ( 16 marks)

answer in detail thanks

Short Answer Question 3 ( 16 marks) CBA stock is currently trading at $75.8. Louise decides to write a covered call on the stock by writing 1 call with a strike of $90 and buying 100 shares of CBA stock at the current market price. The option premium she receives is $750. Assuming the stock does not pay any dividend until the expiration of the option. a. What is the total profit if the stock price remains unchanged? (4 marks) b. What is the total profit if the stock price goes up to $100 ? ( 4 marks) c. What is the total profit is the stock price goes down to $50 ? ( 4 marks) d. Does the covered call offer any protection against the drop in price of the stock? Explain. (4 marks)

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