You sell a call for 5 with a strike price of 40. Your breakeven is $45...

 

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You sell a call for 5 with a strike price of 40. Your breakeven is $45 per share (before considering trading costs). Upon exercise, you would be required to deliver 100 shares at the strike price of 40; if the stock's current market value is at $45 per share or below, you will not have a loss, even upon exercise, since you received $500 in premium when you sold the call. It is possible to write a call and make a profit upon exercise. Given the preceding example, if the call were exercised when the stock's market price was $42, you would gain $300 before trading costs: You sell a call for 5 with a strike price of 40. Your breakeven is $45 per share (before considering trading costs). Upon exercise, you would be required to deliver 100 shares at the strike price of 40; if the stock's current market value is at $45 per share or below, you will not have a loss, even upon exercise, since you received $500 in premium when you sold the call. It is possible to write a call and make a profit upon exercise. Given the preceding example, if the call were exercised when the stock's market price was $42, you would gain $300 before trading costs:

Answer rating: 100% (QA)

2 per share profit x 100 shares 200 500 premium received 200 exercised call value 300 However i... View the full answer