One reason for an investor to conduct a covered call transaction is that he believes that the stock's upside potential is limited and he wants to collect some option premiums. The call writer thus trades the stock’s upside potential for the premium. An investor is less likely to write a covered call if he believes the stock's upside potential is significant because he would be giving up the expected gains if the stock is called away.

The information about Foliette’s gains is correct. If the stock price decreases to $23.70, Foliette can realize a gain of $0.80 if he sells the stock ($23.0 value − $25.70 + $3.50 premium).