Risk Exposure Question


I may be thinking too much about this question, but if the investor owns 100 shares of this stock and writes a call option, I understand in the near term while the option is viable, that they’re upside and downside is limited, but isn’t it also true that the call could expire without being exercised, which would then allow unlimited return potential as the long shares could rise infinitely?

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Hi @Bennie_Kuhn, your analysis is correct - if the option expires, they would be left with the long stock, which could have unlimited gain.

However, when these questions ask about the risk/reward profile, they are talking about the scenario including the live options.