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Steve has an option with a payoff profile that depicts a line that is constant at zero up until some point after which the line slopes downward. What type of action did Steve take to obtain this profile?

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ogorwyne

Answer:

Sold a call option

Explanation:

The action Steve took to get this profile is sold a call option. When you sell a call option, the buyer of that option has being given a right to buy stock at a particular price that is called the strike price and it has a set date of expiration.

This option is basically about the right to sell. The call option is covered if the person selling it is the owner of the underlying stock.

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