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Covered Calls

How is the break-even price of a covered call calculated?
Cost of shares - premium received for selling call
Cost of shares + premium received for selling call
Strike price + premium received for selling call
Cost of shares - strike price
What happens if your covered call is in the money at expiration?
Nothing
Sell shares at the strike price and lose the options premium
Buy shares at the strike price
Sell shares at the strike price and keep the options premium
You purchase shares of XYZ at $20.00 and sell 1 $22.50 call for $0.50, what is your maximum profit potential?
$0.50
$2.50
$3.00
$2.00
We purchase shares of ABC at $65.00 and sell 1 $67.50 call option for $1.50, at expiration ABC trades at $64.00. Did we make money?
Yes
No
Why would you want to sell a covered call?
Generate income
Hedge against a decline
Sell shares at a better price
Lower the net cost basis of a stock
All of the above
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