You invest in the share of Rayleigh Corp. and write a call option on Rayleigh Corp. This strategy is called a ________.
A)covered call
B)long straddle
C)naked call
D)money spread

Question

You invest in the share of Rayleigh Corp. and write a call option on Rayleigh Corp. This strategy is called a ________.
A)covered call
B)long straddle
C)naked call
D)money spread

Quizplus · Accepted Answer

The strategy described is a covered call, where the investor owns the underlying stock (Rayleigh Corp.) and writes a call option on that stock. This strategy can provide income from the sale of the call option premium while also potentially limiting downside risk on the stock position. The other choices, long straddle and naked call, do not involve owning the underlying stock, and a money spread is not a commonly used options strategy.

You Invest in the Share of Rayleigh Corp