You buy one share of stock and sell one call for one share of the stock. The
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Question:
You buy one share of stock and sell one call for one share of the stock. The initial price of the stock is $40, the exercise price is $40 and the premium on the call is $14.80. What is the payoff and what is the profit on your combined position at maturity if the stock price drops to $35 and you close your position in the stock and the option? This is a covered call strategy.
Payoff Profit
A. 0 19.80
B. 0 14.80
C. 35 9.80
D. -10 4.80
E. -15 -0.20
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date: