[QUIZ] Unlock the Power of Options - Session 4

Complete the quiz below to test your understanding after our Options 4th Session

1. What does the Covered Call strategy entails?

a.Buying a long-term LEAPS.
b.Buying Stocks and selling a short-term put option.
c.Buying a short-term Call & Buying stocks.
d.Buying Stocks and selling a Call, usually short-term.

2. When is it a good time to use the Covered Call strategy?

a.When we want to hold the stocks long-term but expects the short-term to be sideways or moderately bullish.
b.When we expect the stock to be very bearish in the near-term.
c.When we expect the stock to be very bullish in the near-term.
d.When we have very little available funds left in our account.

3. Which of the following is NOT the reason why we want to use the Covered Call?

a.For income generation.
b.For partial protection against potential downside risk.
c.To benefit against large price movement of the stock.
d.To reduce the cost of the stock purchase.

4. Assume that you bought the stock of AAA at $200 and you also sold a 1 month-out Covered Call at the strike price of $210 for a premium of $1.80. Which of the following statements are correct?

i.The breakeven price for the Covered Call is $208.20.
ii.If the stock price at expiry is below $210, you get to pocket the entire premium of $1.80.
iii.If the stock price at expiry is above $210, you are obligated to sell the stock at the price of $200.
iv.You get to participate in the price appreciation of the stock up till $210.

a. All of the above
b. i, ii and iv
c. ii, iii and iv
d. ii and iv

5. What are some of the risks of Covered Call?

i.Premium received cannot fully protect downside risks.
ii.Stocks may be assigned when price becomes very bullish.
iii.Limit upside potential and may miss out on big bullish moves.
iv.Capital heavy as it requires stock ownership.

a.i, ii and iii
b. All of the above
c. i, iii and iv
d. ii and iii