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Angelo Martino just purchased 600 shares of AT&E at $61.62, and he has decided to write covered calls against these stocks. Accordingly, he sells 6
Angelo Martino just purchased 600 shares of AT&E at $61.62, and he has decided to write covered calls against these stocks. Accordingly, he sells 6 AT&E calls at their current market price of $6.41. The calls have 3 months to expiration and carry a strike price of $66.50. The stock pays a quarterly dividend of SO.72 a share (the next dividend to be paid in about a month) a. Determine the total profit and holding period return Angelo will generate if the stock rises to $66.50 a share by the expiration date on the calls b. What happens to Angelo's profit (and return) if the price of the stock rises to more than 566.50 a share? c. Does this covered call position offer any protection (or cushion) against a drop in the price of the stock? Explain. a. If the stock rises to 566.50 a share by the expiration date on the calls, the total profit is (Round to the nearest cent) Angelo Martino just purchased 600 shares of AT&E at $61.62, and he has decided to write covered calls against these stocks. Accordingly, he sells 6 AT&E calls at their current market price of $6.41. The calls have 3 months to expiration and carry a strike price of $66.50. The stock pays a quarterly dividend of SO.72 a share (the next dividend to be paid in about a month) a. Determine the total profit and holding period return Angelo will generate if the stock rises to $66.50 a share by the expiration date on the calls b. What happens to Angelo's profit (and return) if the price of the stock rises to more than 566.50 a share? c. Does this covered call position offer any protection (or cushion) against a drop in the price of the stock? Explain. a. If the stock rises to 566.50 a share by the expiration date on the calls, the total profit is (Round to the nearest cent)
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