Draw a profit diagram (label everything) for one covered call net position given that the call...

Draw a profit diagram (label everything) for one covered call net position given that the call option premium is $13.5 and an exercise price of $200. Show any breakeven points and label the maximum gain and the maximum loss (I need the exact numbers). The current stock price is $201. What would the profit be on 10,000 options if the ending stock price was $180? What would the profit be on 10,000 options if the ending stock price was $220?

Expert Solution

A covered call refers to a financial transaction in which the investor selling call options owns an equivalent amount of the underlying security. To execute this an investor holding a long position in an asset then writes (sells) call options on that same asset to generate an income stream.

jeff jeffy answered 2 years ago

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