Call Options
What are the possible outcomes for the writer of a covered call?
Covered call = own stock + sell call. Max gain = premium + (strike - stock cost). Max loss = stock cost - premium.
Complete Analysis & Legal Rationale
A covered call writer owns the underlying stock and sells a call. Profit is limited to the premium received plus any gain up to the strike price. Loss is limited because they own the stock (it can only go to zero), and the premium received provides some downside protection. Compare to naked calls which have unlimited loss potential.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Matches the verified teaching point in the explanation.
Does not match the governing concept in the explanation.
Does not match the governing concept in the explanation.
Does not match the governing concept in the explanation.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA materials.