Series 7 practice questionmediumOptions — Options Strategies Suitability
A retired investor with a large stock portfolio seeking income and willing to sell stock at a higher price would be best suited for which strategy?
- ABuying puts
- BWriting uncovered calls
- CBuying straddles
- DWriting covered calls✓ Correct answer
Explanation
Why D — Writing covered calls
Covered call writing generates premium income from existing stock holdings. The investor receives the premium and is willing to sell at the strike price if called. This is considered a conservative options strategy appropriate for income-seeking investors who are willing to cap their upside potential in exchange for current income.
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