If You Combine a Long Stock Position with Selling an At-The-Money

question 41

Multiple Choice

If you combine a long stock position with selling an at-the-money call option, the resulting net payoff profile will resemble the payoff profile of a ________.

• A) long call
• B) short call
• C) short put
• D) long put

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Definitions:

Profit

The financial benefit realized when revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the operation.

Total Output

The total amount of goods and services produced within an economy at a given overall price level in a given time period.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the scale of the operation and output increases.

Coordination Problems

Challenges that arise in aligning the plans and actions of multiple parties in order to achieve a common goal or optimize outcomes.