Chartered Investment Manager (CIM) Practice Exam · Question
An investor owns shares of a Canadian oil and gas company and writes a call option against these shares with a strike price above the current market price. This strategy is known as a:
A covered call involves owning the underlying asset and simultaneously selling a call option on that same asset. This strategy generates income from the premium
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Question: An investor owns shares of a Canadian oil and gas company and writes a call option against these shares with a strike price above the current market price. This strategy is known as a:
Answer options: ✅ Covered call
- Protective put
- Long straddle
- Short strangle
Correct answer: Covered call
Explanation: A covered call involves owning the underlying asset and simultaneously selling a call option on that same asset. This strategy generates income from the premium received but limits the upside potential if the stock price rises above the strike price.
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