SIE practice questioneasyMax gain/loss calculations
What is the maximum loss for a covered call writer?
- AStock price drops to zero, minus premium received✓ Correct answer
- BUnlimited loss
- CPremium received
- DDifference in strike prices
Explanation
Why A — Stock price drops to zero, minus premium received
If stock value falls to zero, loss is total cost minus premium. Loss is not unlimited because the stock is owned.
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