SIE practice questionmediumOptions
An investor writes a covered call. What is the primary objective of this strategy?
- AGenerate additional income on a stock position✓ Correct answer
- BProtect against a loss if the stock declines sharply
- CProfit from a decline in the stock's price
- DGuarantee the stock will be called away
Explanation
Why A — Generate additional income on a stock position
Writing a covered call generates premium income but does not protect against major declines. Profit from declines is a bearish strategy; exercise is possible, not certain.
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