Map the Covered Call Payoff
Calculate basic covered-call outcomes at expiration.
before-after worked-steps comparison Maya owns 100 shares of DEF at $38 and sells 1 DEF 42 call for $1.20. Map the expiration outcomes. Covered call map: effective breakeven = stock cost - call premium; capped sale outcome = strike - stock cost + premium; downside remains below breakeven. The common trap is calling the premium protection. It is only a limited cushion. The stock can fall much farther than the premium collected. Premium received $1.20 x 100 = $120 received for selling the call. The premium is immediate income, but it is also compensation for giving the call buyer upside…
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