Help: questin on Options

An investor writes a covered call with a strike price $44 on a stock selling at $40 for a 3 premium. The range of possible gains to the writer of this covered call on the combined position is ?. The answer is -37 to $7. I don’t know why. What should I memorize to tackle this kind of questions? Thanks a lot.

well, if stock goes to zero, you lose 40 on the stock you bought, but gain 3 on the option you sold, so $40-$3=$37. If stock is >$44, than you have to sell it @ $44. In this case you make $4 on the stock, and $3 on the option, so $7 overall. Good luck guys, I took LI last year and am taking LIII in June… A very high percentage of people on this forum typically pass…