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SIE: Options
SIE practice questionhardCovered calls

A covered call is most appropriate for an investor who believes:

  1. AStock will fall sharply
  2. BStock will remain stable or rise modestly✓ Correct answer
  3. CStock will rise dramatically
  4. DStock will be highly volatile
Explanation

Why BStock will remain stable or rise modestly

Covered calls profit if stock stays stable or rises moderately. Sharp rises limit gains, sharp drops bring risk.

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