You buy one share of stock and sell one call for one share of the stock. The initial price of the stock is $40, the exercise price is $40 and the premium on the call is $14.80. What is the payoff and what is the profit on your combined position at maturity if the stock price drops to $35 and you close your position in the stock and the option? This is a covered call strategy. 

 

               Payoff                  Profit     

A.           0                            19.80

B.           0                            14.80

C.           35                          9.80

D.           -10                        4.80

E.            -15                        -0.20