You invest in the stock 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 stock 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

Writing a call option while holding the underlying stock is known as a covered call. A long straddle involves buying a put and call option at the same strike price and expiration date, while a naked call involves writing a call option without holding the underlying stock. A money spread is a term that is not commonly used in finance.

You Invest in the Stock of Rayleigh Corp