CFA option question selling, question, investor, understand, option

brainsX

An investor writes a call option at $3 with k=100 on a stock thats he owns.The investor paid $85 for the stock.If it at expiration of the call option the stock price has risen to 110.how much is his profit ?
the answer is 18.i can understand that he sell his call to make a $3 and selling his stock when the stock price is 110 so the answer should be 28.wuts wrong with my answer ? thank you !

neil1234

Because he writes the call to others, he has to sell the stock for only 100(strike price) even when the stock worths 110. Thus the answer is 15+3=18.

ap0258

This situation can be regarded as a covered call, which has locked the profit 15(100-85) when the price is above the strike price 100. Plus the call premium 3, the answer is correct.
    you can refer to the Reading 72(maybe 73) Risk applications, topics on covered call and protective put

kickthatcfa

cheers buddies