SIE practice questionmediumCovered calls
A covered call strategy provides which main benefit?
- AEliminates all risk
- BEnsures unlimited upside in the stock
- CGenerates income in exchange for possibly selling shares✓ Correct answer
- DMaximizes downside protection
Explanation
Why C — Generates income in exchange for possibly selling shares
Covered calls earn income from premiums but may require selling shares if exercised. The strategy doesn’t eliminate risk (C), guarantee unlimited upside (B), or fully protect downside (D).
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