Mary wrote a 40 call on ABC stock at a price of $275. She does not own any shares of ABC. Mary has
I. limited her losses to $275.
II. unlimited loss potential.
III. limited her gains to $275.
IV. unlimited profit potential.
A) I and IV only
B) II and III only
C) I and III only
D) II and IV only

Question

Quizplus · Accepted Answer

Mary has unlimited loss potential because she does not own the shares (naked call), and her gains are limited to the premium received ($275).

Mary Wrote a 40 Call on ABC Stock at a Price