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.
• b) Short 1 IBM Dec 104 call and Long 100 shares of IBM stock.
  Yes. The loss potential associated with the short call is compensated with the long position in the underlying. In practice it is very difficult to buy the underlying for exactly the same price as the strike price of the option. Continue

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