A customer sells 200 shares of XYZ stock at $50 per share and simultaneously buys 2 XYZ May 50 Calls at $3 each. What is the breakeven point for this covered call strategy?

Correct answer: D. $47.00

This is a covered call strategy. The breakeven point is calculated by taking the stock purchase price (or sale price, in this case, since it's a short stock position) and subtracting the premium received. Here, the customer sold the stock at $50 and paid $3 for the call, so the effective sale price is $50 + $3 = $53. However, the question describes selling stock and buying calls, which is an unusual way to phrase a covered call. Assuming it means the customer owns the stock and sells calls against it, the breakeven is Stock Price - Premium Received. But if they sold stock short and bought calls, it's a long call/short stock combination. Let's re-evaluate based on the most common interpretation of 'covered call strategy' which is long stock + short call. The question states 'sells 200 shares of XYZ stock at $50' and 'simultaneously buys 2 XYZ May 50 Calls at $3 each'. This phrasing is tricky. If it's a covered call, it means they OWNED the stock and sold the calls. If they are selling stock (shorting it) and buying calls, this is a synthetic long put or a protective put on a short stock position. Let's assume the question intends to ask about a covered call where the stock was bought at $50 and calls were sold for $3. In that typical covered call scenario, the breakeven is Stock Purchase Price - Premium Received. $50 - $3 = $47. If the question implies selling stock short and buying calls, this is a different strategy entirely. Given the options, the covered call breakeven is the most likely intended calculation.