Question

In any covered call strategy

		The payoff is always greater than the profit
		The payoff is always smaller than the profit
		The payoff is always the same as the profit
		The payoff could be higher, lower, or the same as the profit.

Answer 1

In a covered call strategy the investor will sell call option of underlying security and buy the equal number of underlying security and wait for the option to exercise.

In any covered call strategy, the pay off could be higher, lower or same as profit

Let's take an example:

Investor purchases 100 share at 98.50 and one call is sold at 4. Let's assume strike price 100.50

Maximum profit = 100.50 - 98.50 + 4 = 6

Maximum profit is restricted at 6

maximum risk will occur if stock prices decline and can reach to 0.