Which of the Following Is True About Writing a Covered

question 5

Multiple Choice

Which of the following is true about writing a covered call? choose two)

• A) It involves buying the stock and selling a call option on the stock.
• B) It involves selling the stock and selling a call option on the stock.
• C) It is equivalent to buying a put option plus borrowing a certain amount of cash.
• D) It is equivalent to selling a put option plus borrowing a certain amount of cash.

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Definitions:

Long-run Equilibrium

A state in market-based economies where all factors of production are fully utilized, leading to no further economic incentive for reallocation.

Minimized Average Total Cost

The point at which a firm achieves the lowest possible cost per unit of production by optimizing the scale of production.

Price

The amount of money required to purchase a good or service, often determined by supply and demand dynamics.

Long-run Equilibrium

A situation in competitive markets where all firms have adjusted to a state where there is no incentive to enter or exit the market, and economic profits are zero.