SIE practice questionhardOptions Strategies
An investor expects moderate appreciation in a stock and wishes to generate extra income. Which option strategy is most appropriate?
- ABuy a put option
- BSell a covered call✓ Correct answer
- CBuy a call option
- DSell a naked put
Explanation
Why B — Sell a covered call
Selling a covered call allows earning income and benefiting from moderate stock increases. Buying a put is bearish, buying a call offers unlimited upside but no income, and selling a naked put is riskier and not income-focused in this scenario.
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