The purchase of 200 shares of HGF at 45, and the subsequent sale of 2 HGF 50 calls at 3, could produce all of the following except

Answer 1

This is covered call writing. The maximum loss that could be incurred is $8,400 ($9,000 paid for shares less premiums of $600 received). If you can lose $8,400, then you can certainly lose $6,000 (if, for example the value of the stock drops to 12). The maximum profit that can be expected is $1,600 (strike price of $10,000 received when calls are exercised minus the purchase price of $9,000 plus $600 in premiums received). Because the maximum profit possible is $1,600, it is impossible to have a profit of $2,000.