You own 300 shares of ABC stock.Which one of the following would allow you to receive an option premium in exchange for selling your shares in ABC at the strike price?
A)straddle
B)long spread
C)selling a put
D)buying a call
E)writing a covered call

Question

Quizplus · Accepted Answer

Writing a covered call allows you to receive an option premium in exchange for selling your shares of ABC at the strike price. A covered call means you already own the underlying stock (in this case, ABC shares) and you sell a call option against it. A straddle involves buying both a call and a put option with the same strike price and expiration date, which does not involve selling your shares. A long spread involves buying and selling different options contracts to create a spread position. Selling a put involves selling an option contract to buy shares at a specific price, which does not involve selling your current shares. Buying a call involves purchasing an option contract to buy shares at a specific price, which also does not involve selling your current shares.

You Own 300 Shares of ABC Stock