Question

Which option position is used to generate additional income against a short stock position?

Answer 1

-Investors use long calls to protect short stock positions. If the market value of the stock needed to cover the short position begins to rise, the investor can exercise the long call position to buy the stock. Short stock positions, short uncovered calls, and short stock combined with short puts, all subject investors to unlimited risk

Answer 2

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If a customer buys 100 shares of stock and writes one out-of-the-money call against his long position, the breakeven point is the
cost of stock purchased - premium = Breakeven point

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