Just came across with one more “ambiguity”:
- CFAI Mock 2012 and Q43 says “ covered calls do NOT provide downside protection”…
I had some weeks ago post this question “do covered call provide some downside protection?”, and this because I answered NO and the answer was wrong : the premium earned DO provides some downside in case of losses in underlying.
I had previously thought the same way as the answer now given by CFAI, NO downside protection, and I inadvertly changed my mind due to other provider.
Just to warn and help you guys. An easy one for sure but if did not wrote this mock I would eventually lose this one on exam day .
best of luck