Consider a covered call strategy. You bought 100 shares of Firm ABC two months ago and...

 

Transcribed Image Text:

Consider a covered call strategy. You bought 100 shares of Firm ABC two months ago and it has appreciated from $87 to $110 in that time. You feel it is relatively stabilized for the short-run, but you do not want to exit right now. So, you do a covered call strategy with a call option with exercise price of $115 and premium of $6.15. At expiration of the option, the stock price is $113. How much money have you made on the combined positions (stock + option overlay) at the expiration of the option? Consider a covered call strategy. You bought 100 shares of Firm ABC two months ago and it has appreciated from $87 to $110 in that time. You feel it is relatively stabilized for the short-run, but you do not want to exit right now. So, you do a covered call strategy with a call option with exercise price of $115 and premium of $6.15. At expiration of the option, the stock price is $113. How much money have you made on the combined positions (stock + option overlay) at the expiration of the option?

Answer rating: 100% (QA)

To calculate the profit from the covered call strategy at the expiration of the option we need to co... View the full answer