SIE practice questioneasyCovered calls
A covered call is created when an investor:
- ASells a call without owning the stock
- BOwns the stock and sells a call✓ Correct answer
- CBuys a call and sells a put
- DSells a put and buys a call
Explanation
Why B — Owns the stock and sells a call
A covered call is selling a call option while owning equivalent shares of the underlying stock. B describes a naked call, C and D are unrelated strategies.
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