A call option written against stock owned by the writer is said to be:
A)naked.
B)in the money.
C)out of the money.
D)covered.

Question

A call option written against stock owned by the writer is said to be:
A)naked.
B)in the money.
C)out of the money.
D)covered.

Quizplus · Accepted Answer

A call option written against stock owned by the writer is considered covered because the writer holds the underlying stock, which provides a source for fulfilling the obligation of the option contract. This is in contrast to a naked call, where the writer does not own the underlying stock and is potentially exposed to unlimited losses.

A Call Option Written Against Stock Owned by the Writer