I am pleased that twenty-four responses were received to Quiz #3. Everyone had six or more correct answers and four responses were 100% correct. All ten questions were developed from information contained in the first two sections of my favorite book primarily about Covered Calls: "New Insights on Covered Call Writing" by Lehman and McMillan. If you don't already have it, please consider reading it carefully. One place you can get it is here: https://rb.gy/tzahq0
1. Another name for Covered Calls is any one of three answers were possible here: Buy-Write, Covered Write, or Equity Overwrite.
2. Each Call option represents how many shares? _100____
3. The Call owner has the right to buy. The Call seller has the _obligation to sell.
4. When the Call owner exercises their Call option, the Call seller must be assigned (sell) the shares at the strike price_.
5. You established a Covered Call by buying 100 shares of XYZ at $102 and sold a $100 Call option at $4 premium. The net profit if assigned at expiration (excluding commissions) is $_$200 ($2 per share profit x 100 shares)_.
6. If you make a $200 net profit on a $10,000 investment in exactly one month, your annualized return-on-investment is _24%_.
7. The closer to the options expiration date we get, the rate of an option's time value decay increases.
8. To roll out a current Covered Calls position to a future Covered Calls in the same stock, a single buy-to-close current Calls and sell-to-open future Calls transaction is made.
There was some confusion on what I was asking for here, so I also gave credit to answers such as rollout or rolling.
9. An out-of-the-money Call option has only time value (also known as extrinsic value).
10. Before entering a Covered Calls position on stock XYZ, the best way to compare potential financial results in positions with differing expiration dates is by calculating their annualized return on investment.
Some of the questions on these 3 quizzes have been related to obtaining a better understanding of certain terms related to Covered Calls. I suggest you try searching via Investopedia.com whenever you seek further insight on any specific investing-related term or topic.
As you know, these quizzes are intended only for the purpose of providing information and education for anyone interested in Covered Calls investing. Hopefully, these quizzes have helped you in some way and have encouraged you to want to learn more about Covered Calls investing. As always, I enjoy receiving your questions or comments about anything related to Covered Calls investing -- at partlow@cox.net
Best Wishes and Stay Safe,
Jeff
