Assume you purchase one share of a stock and sell a call option on a single share of that same stock with an exercise price of $25. What is the maximum payoff you can realize on this combination?

Multiple Choice

• An amount equal to the stock price on the option expiration date

• The exercise price of $25

  Correct

• An amount equal to $25 minus the stock price on the option expiration date

  Incorrect

• Zero

• An amount equal to the stock price on the expiration date plus $25