A covered call strategy benefits from what environment?
A) Falling interest rates
B) Price stability
C) Price volatility
D) Unexpected events

Question

Quizplus · Accepted Answer

A covered call strategy involves selling call options on stocks that are held in a portfolio. In a price stable environment, the stock price is unlikely to move significantly, which makes it easier for the investor to sell call options that are unlikely to be exercised, generating income. If the stock price were to become volatile, there is a greater likelihood of the call options being exercised, potentially resulting in the investor missing out on any further gains in the stock price. Falling interest rates and unexpected events are not necessarily relevant to the success of a covered call strategy.

A Covered Call Strategy Benefits from What Environment