An investor writes a covered call with a strike price of $44 on a stock selling at $40 for a $3 premium. The range of possible payoffs to the writer of this covered call on the combined position is:
-$37 to $7.
The net cost of the position is 40 - 3 = $37. If the stock price at expiration is $4307_w36_h15.png$, the gain on the position is $7. If the stock price were to fall to zero, the investor would lose $37.
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