Question

Susan writes 3 abc january 35 covered calls at $3.25. abc shares rise to $40 and susan is assigned. what are her total net proceeds from this strategy?

a. $11,475
b. $12,975
c. $12,000
d. $10,500

Answer 1

The total net proceeds from Susan's strategy of writing 3 covered calls and being assigned at $35 while the stock is at $40, including the received premiums, is $11,475 (a).

Step-by-step explanation:

The student is asking about the total net proceeds from exercising covered calls in a stock option strategy. Susan has written 3 contracts of ABC January 35 covered calls and receives a premium of $3.25 per share. Each contract typically covers 100 shares, so for 3 contracts she receives 3 contracts x 100 shares/contract x $3.25/share = $975.

Additionally, she is assigned to sell the shares at $35, but since the stock is at $40, she receives 3 contracts x 100 shares/contract x $35/share = $10,500 from the stock sale. Combining these two amounts gives us the total net proceeds, which is $975 + $10,500 = $11,475. This corresponds to option A in the question provided by the student.