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2. Reverse of a covered call ( a short stock + a long call) An investor is shorting a MCD stock. The stock borrowed must
2. Reverse of a covered call ( a short stock + a long call) An investor is shorting a MCD stock. The stock borrowed must be re- turned at $35.50. She longs a 40 call MCD option. Its option premium is $1.15. 2. Reverse of A Covered Call Strategy MCD must returned to a broker at : Strike Price Premium 35.5 40 1.15 - - Short Stock S(Stock Price at expiration) Short Stock Long Call Portfolio (Reverse of A Covered Call) - Long Call Portfolio (Reverse of A Covered Call) 20 25 30 35 40 45 50 Question2. From the P&L plot, provide you findings on what situation a reveserse of covered call strategy would be desirable. Type your answer in this box. 2. Reverse of a covered call ( a short stock + a long call) An investor is shorting a MCD stock. The stock borrowed must be re- turned at $35.50. She longs a 40 call MCD option. Its option premium is $1.15. 2. Reverse of A Covered Call Strategy MCD must returned to a broker at : Strike Price Premium 35.5 40 1.15 - - Short Stock S(Stock Price at expiration) Short Stock Long Call Portfolio (Reverse of A Covered Call) - Long Call Portfolio (Reverse of A Covered Call) 20 25 30 35 40 45 50 Question2. From the P&L plot, provide you findings on what situation a reveserse of covered call strategy would be desirable. Type your answer in this box
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