What Is the Disadvantage of a Strategy of Rolling Over

question 2

Multiple Choice

What is the disadvantage of a strategy of rolling over a covered call to avoid exercise?

• A)the call premium is essentially thrown away
• B)transaction costs tend to be high
• C)the stock will incur losses
• D)the call is more expensive when rolled over
• E)none of the above

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Definitions:

Overdose

An excessive dose of a drug that can seriously threaten one’s life.

Central Nervous System

The part of the nervous system that consists of the brain and spinal cord, controlling most functions of the body and mind.

Stimulants

Substances that increase activity in the brain and nervous system, resulting in increased alertness, attention, and energy.

Narcotics

A class of drugs that affect mood or behavior, often used medically to relieve pain, but can also lead to addiction.