1. Suppose that it is 9/15/2020 and that you own 400 shares of XYZs common stock. You do not believe that XYZs common stock will perform all that well so you are considering writing a covered call using the December 2020, X = 45 call option. Explain your potential gains and losses (in dollar terms) from following this strategy.

Selected Option Quotations for XYZ Corp (use in questions 4-7) XYZ Price Strike -Put- Volume Price 43.15 45.00 43.15 45.00 43.15 50.00 43.15 50.00 -Call- Expiration Volume Price Dec 2020 9923 1.89 Mar 2021 307 3.04 Dec 2020 4578 0.64 Mar 2021 212 1.53 2632 108 1875 76 3.52 4.45 7.24 7.88 Date of Quotation 9/15/2020 9/15/2020 9/15/2020 9/15/2020 11/15/2020 11/15/2020 11/15/2020 11/15/2020 46.20 45.00 46.20 45.00 46.20 50.00 46.20 50.00 Dec 2020 Mar 2021 Dec 2020 Mar 2021 1282 3645 468 3645 2.29 3.94 0.42 1.86 1279 2856 156 1874 1.02 2.44 4.14 5.33 Selected Option Quotations for XYZ Corp (use in questions 4-7) XYZ Price Strike -Put- Volume Price 43.15 45.00 43.15 45.00 43.15 50.00 43.15 50.00 -Call- Expiration Volume Price Dec 2020 9923 1.89 Mar 2021 307 3.04 Dec 2020 4578 0.64 Mar 2021 212 1.53 2632 108 1875 76 3.52 4.45 7.24 7.88 Date of Quotation 9/15/2020 9/15/2020 9/15/2020 9/15/2020 11/15/2020 11/15/2020 11/15/2020 11/15/2020 46.20 45.00 46.20 45.00 46.20 50.00 46.20 50.00 Dec 2020 Mar 2021 Dec 2020 Mar 2021 1282 3645 468 3645 2.29 3.94 0.42 1.86 1279 2856 156 1874 1.02 2.44 4.14 5.33