Chapter 02 · Section 2.1

A covered call position (representation)

Which of the following propositions below represent a covered call position?

• a) Short 1 IBM Dec 104 call and Long 1 IBM Dec 104 put.
  No. The long put does not compensate for the risk inherent with a short call position. If the price of the underlying increases, the put loses its value and a loss will be incurred by holding the short call position.
  b) Short 1 IBM Dec 104 call and Long 100 shares of IBM stock.

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