Pop Quiz – Part 1

FRM Pop Quiz 78: Financial Markets and Products

An investor who pursues a covered call strategy is most likely:

  • Trading the downside in the stock in return for the call premium.
  • Trading the upside in the stock in return for the call premium.
  • Daily VaR measures are effective in both normal market conditions and when there are crises.
  • Is confident that the stock will rise in the future.
Correct Answer B

An investor who pursues a covered call strategy essentially trades away the upside in the stock in return for the premium collected upon writing the call.


End of quiz

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