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Hi Trond,

When comparing stock trades with option trades, don't look at the cost out of pocket in initiating the trade. Instead, look at the delta of the positions, the breakeven price, the maximum profit, and the maximum loss.

1. Covered call (Long stock and short call)

Delta is 51.5%

Breakeven is $6.75. Stock costs $7.25 minus $0.50 credit for selling April $7.50 call.

Maximum profit is $0.75 ($7.50 strike minus $6.75 cost of initiating position).

Maximum loss is $6.75 (stock goes to zero, stock cost of $7.25 minus $0.50 premium received for selling call).

2. Short Put

Delta is 51.5%

Breakeven is $6.75. If short put is exercised, must buy stock for $7.50 but can deduct $0.75 received for selling April $7.50 put.

Maximum profit is $0.75 (premium received by selling put)

Maximum loss is $6.75 (stock goes to zero, must buy stock at $7.50 minus $0.75 premium received for selling put)

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