You Wrote a Covered Call with a Strike Price of $35

question 86

Multiple Choice

You wrote a covered call with a strike price of $35 and an option premium of $1.10. Assume the stock price is $34 a share currently and that it falls to $32 a share and remains at that price until the option expires. As a result, you will:

• A)lose an amount equal to the option premium.
• B)lose the option premium but get to keep the stock.
• C)keep both your stock and the option premium.
• D)keep the option premium but lose your shares of stock.
• E)lose both your stock and the option premium.

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Definitions:

Inventory Costing Method

A method used to assign costs to inventory items, such as FIFO (First-In, First-Out), LIFO (Last-In, First-Out), or weighted average cost.

LIFO

Last In, First Out, an inventory valuation method where the most recently produced or acquired items are sold first, affecting the cost of goods sold and inventory value.

FIFO

"First In, First Out," a method of inventory valuation where the earliest acquired goods are sold first.

Rising Prices

A situation where the general level of prices for goods and services in an economy increases over a period of time.