USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for Citigroup

-Refer to Exhibit 16.4. A covered call is an appropriate strategy if
A) an investor wishes to generate additional income.
B) an investor wished to insure against a decline in share values.
C) an investor expected share prices to be volatile.
D) an investor expected share prices to remain in a trading range.
E) an investor expected share prices to be volatile but was inclined to be bullish.

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for Citigroup
 
-Refer to Exhibit 16.4. A covered call is an appropriate strategy if
A) an investor wishes to generate additional income. 
B) an investor wished to insure against a decline in share values. 
C) an investor expected share prices to be volatile. 
D) an investor expected share prices to remain in a trading range. 
E) an investor expected share prices to be volatile but was inclined to be bullish.

Quizplus · Accepted Answer

A covered call is a strategy where an investor holds a long position in an asset and sells call options on that same asset in an attempt to generate income. Therefore, the correct answer is (A) an investor wishes to generate additional income.