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CoverTo use the forward market to protect against exchange risk. Typically, an importer with a future commitment to pay in foreign currency would buy it forward, and exporter with a future receipt would sell it forward, and a purchaser of a foreign bond would sell forward the expected proceeds at maturity. See hedge.CoverThe purchase of a contract to offset a previously established short position.CoverThe details of insurance provided by an insurance company to a policyholder.Sometimes cover is used as shorthand for 'dividend cover' - see separate definition of this term.Similar MatchesCovered writerCovered writerAn investor who writes options only on stock that he or she owns, so that option positions may be collected. Interest coverInterest coverInterest cover measures the amount of interest paid by a company on its borrowings against its operating profit in the same period.The ratio shows the impact of gearing on a company's profit and loss account. If the figure is low, a small reduction in operating profits, or a rise in the cost of borrowing, can wipe out pre-tax profits. To calculate interest cover, divide the operating profits by the interest paid.Example: a company which has profits of £4m and which pays net interest of £1m, has interest cover of 4. Coverage ratiosCoverage ratiosRatios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and lease obligations, including the interest coverage ratio and the fixed-charge coverage ratio. Covered combinationCovered combinationA strategy in which one call and one put with the same expiration, but different strike prices, are written against each 100 shares of the underlying stock. Example: writing 1 XYZ Jun 50 call and 1 XYZ Jun 55 put, and buying 100 shares of XYZ stock. In actuality, this is not a fully 'covered' strategy because assignment on the short put would require purchase of additional stock. Covered StraddleCovered StraddleAn option strategy in which one call and one put with the same strike price and expiration are written against 100 shares of the underlying stock. In actually, this is not a "covered" strategy because asignment on the short put would require purchase of stock on margin. This method is also know as a covered combination. Further SuggestionsForward coverModified Accelerated Cost Recovery System (MACRS) Asset coverage test extended coverage European Recovery Program Guaranteed replacement cost coverage insurance Recovery covered writing Cost Recovery Period Covered or hedge option strategies critical illness cover Price discovery process Cash flow coverage ratio Adequacy of coverage Covered Straddle Write Accelerated cost recovery system (ACRS) Covered interest parity Rally (recovery) Covered interest arbitrage covered warrant Uncovered options Initiate coverage Covered option Uncovered call writing Coverage initiated |
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