1. A covered call (a long stock + a short call) An investor purchases a MCD stock at $35.50 and she immediately shorts a 40 call MCD option. Its option premium is $1.15. 1. A Covered Call Strategy MCD purchased is: Strike Price Premium 35.5 40 1.15 S(Stock Price at expiration) Long Stock Short Call Portfolio (A Covered Call) - - Long Stock 20 25 Short Call 30 Covered Call 35 20 25 30 35 40 45 50 1. A covered call (a long stock + a short call) An investor purchases a MCD stock at $35.50 and she immediately shorts a 40 call MCD option. Its option premium is $1.15. 1. A Covered Call Strategy MCD purchased is: Strike Price Premium 35.5 40 1.15 S(Stock Price at expiration) Long Stock Short Call Portfolio (A Covered Call) - - Long Stock 20 25 Short Call 30 Covered Call 35 20 25 30 35 40 45 50