SIE practice questionmediumCovered calls
The primary risk for an investor writing a covered call is:
- AUnlimited loss
- BMissing out on gains if the stock rises sharply✓ Correct answer
- CObligation to buy stock at higher prices
- DLosing the premium received
Explanation
Why B — Missing out on gains if the stock rises sharply
The risk is the stock being called away if it rises above the strike. Loss is not unlimited, and the premium helps offset risk.
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