Question

"If a portfolio manager believes that the market will be stable over the next 6 months, to generate extra income, the manager could:"

Answer 1

Answer and Explanation:

For earning an extra income, the options contracts could be sold at the premium i.e. collected or in short word sell naked index calls.

Now if the index calls writer exercised, so the delivering of the stock could not be held as it delivers only cash

And, also the writing of index call oppose to the securities portfolio should be termed as a naked writing strategy

While on the other hand in case of the income writing, if the call writer owns the physical instrument than the writer expected to the market for staying neutral