covered option

Thân thiện

A trader holds a covered option to hedge their stock position.

Definition

1. Noun:
   • A put or call option backed by the shares underlying the option: A "covered option" is a financial derivative contract where the seller (writer) of the option owns the underlying asset (e.g., shares of stock) that would be required if the option is exercised. This ownership provides security or "cover" for the seller's obligation.

Usage

• Noun:
  • Writing a covered call is a common strategy for generating income from a stock portfolio.
  • The investor sold a covered option, so they were not at risk of a short squeeze.

Advanced Usage

• "Covered call": A specific type of covered option where the seller owns the underlying shares and sells a call option on them.

  • Her covered call strategy provided premium income while she held the stock.

• "Covered put": A less common type of covered option where the seller is short the underlying asset or has sufficient cash to purchase it, and sells a put option.

  • He executed a covered put by selling a put option while maintaining a cash-secured position.

Variants and Related Words

• Covered call (n): A call option written against a long position in the underlying security.
• Covered put (n): A put option written when the writer is short the underlying security or has cash to cover the purchase.
• Naked option / Uncovered option (n): The opposite of a covered option; an option sold without owning the underlying asset, representing higher risk.

Synonyms

• Secured option: An option where the writer's obligation is backed by the underlying asset.
• Hedged option: (In a general sense) An option position offset by an opposing position in the underlying asset.

Related Phrases

• To write a covered option: The act of selling a covered option.
  • The portfolio manager decided to write a covered option on the blue-chip stock.
• Covered option strategy: An investment approach utilizing covered options.
  • The covered option strategy is considered more conservative than selling naked options.

Học thuật

Noun

1. a put or call option backed by the shares underlying the option