Calculate the maximum potential profit and loss

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Question - A nine-month call option with a strike price of $22 costs $4.00. The underlying stock price is $21.00. Calculate the maximum potential profit and loss if a trader writes a covered call?

a. The maximum potential profit is $5 whereas the maximum potential loss is unlimited

b. The maximum potential profit is $5 whereas the maximum potential loss is $17

c. There is an unlimited potential of net profit whereas the maximum potential loss is limited to $17

d. There is an unlimited potential of net profit whereas the maximum potential loss is limited to $21

Reference no: EM133018664

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