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:

A -$37 to $7.

explanation

1212The net cost of the position is 40 - 3 = 37. If the stock price at expiration is , 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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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:

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