An investor who "writes" a call option against stock held in his or her portfolio is selling a(n)
A) Straddle option.
B) Put option.
C) Out-of-the-money option.
D) Naked option.
E) Covered option.

Question

An investor who "writes" a call option against stock held in his or her portfolio is selling a(n)
A) Straddle option.
B) Put option.
C) Out-of-the-money option.
D) Naked option.
E) Covered option.

Quizplus · Accepted Answer

Selling a call option against stock held in one's portfolio is known as a covered call option. The term "covered" refers to the fact that the option writer already owns the underlying asset (stock) that the option is for, providing a cushion of protection against potential losses.

An Investor Who "Writes" a Call Option Against Stock Held