Series 7 practice questioneasyOptions — Call Writer Max Gain
What is the maximum gain for a writer of a call option?
- AUnlimited
- BThe strike price
- CThe premium received✓ Correct answer
- DThe difference between the market price and the strike price
Explanation
Why C — The premium received
The maximum gain for a call writer (whether covered or uncovered) is the premium received. The best-case scenario is that the option expires worthless (stock stays at or below the strike price), and the writer keeps the entire premium. Writers cannot earn more than the premium.
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