SIE practice questionmediumAccount Types: Options Strategies
A customer in an options account writes a covered call. What must the customer own?
- AA T-bill maturing after expiration
- BA corresponding put option
- CNothing prior to writing the call
- DThe underlying stock✓ Correct answer
Explanation
Why D — The underlying stock
A covered call is written when the customer owns the underlying stock. The stock ownership covers the obligation to deliver shares if assigned. A Treasury bill, corresponding put, or no existing position would not make the call covered.
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