Which of the following best defines a covered call?
A) Purchase a put option to protect a long position in an underlying asset.
B) Position between the floor and ceiling price.
C) The right, but not an obligation, to sell an underlying asset at a fixed price for a specified time.
D) Selling call options while owning the underlying asset

Question

Quizplus · Accepted Answer

A covered call involves owning the underlying asset and selling call options. The seller of a call option receives a premium, but limits their potential upside if the underlying asset rises above the strike price of the call option. The reason this strategy is called "covered" is because the seller owns the underlying asset, which can be delivered if the call option is exercised.

Which of the Following Best Defines a Covered Call