Assume the stock price is $50, a call option on that stock has a premium of $5 and a put option on that stock has a premium of $3, and you presently hold no position in the three. Ignoring commissions, a covered call on 100 shares would require an investment of
A) $4,500
B) $4,700
C) $5,300
D) $5,700

Question

Quizplus · Accepted Answer

A covered call on 100 shares would require an investment of $4,500 because the investor would need to buy 100 shares of the stock at $50 per share, which would cost $5,000, and then sell a call option on those shares for $5 per share, which would bring in $500, resulting in a net investment of $4,500.

Assume the Stock Price Is $50, a Call Option on That