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Covered call |
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Covered callA short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at the market price, if the holder of that option decides to exercise it.Covered call Similar MatchesUncoveredUncoveredSee: 'naked'. Uncovered Put writingUncovered Put writingA short put option position in which the writer does not have a corresponding short position in the underlying security or has not deposited, in a cash account, Covered straddleCovered straddleAn option strategy in which one call and one put with the same strike price and expiration are written against each 100 shares of the underlying stock. Example: writing 1 XYZ Sep 50 call and 1 XYZ Sep 50 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. Uncovered interest parityUncovered interest parityEquality of expected returns on otherwise comparable financial assets denominated in two currencies, without any cover against exchange risk. Uncovered interest parity requires approximately that i = i* + a where i is the domestic interest rate, i* the foreign interest rate, and a the expected appreciation of foreign currency at an annualized percentage rate. Covered interest arbitrageCovered interest arbitrageA combination of transactions on two countries' securities and exchange markets designed to profit from failure of covered interest parity. A typical set of transactions would include selling bonds in one market, using the proceeds to buy spot foreign currency and foreign bonds, and selling forward the return at a future date. See also one-way arbitrage. Further SuggestionsCovered interest parityCovered Straddle Covered or hedge option strategies Covered writer Covered position Uncovered options Covered position Covered interest arbitrage covered writing Uncovered call writing Covered Covered interest rate covered warrant Covered Straddle Write Covered call writing strategy covered combination Covered Interest Rate Parity Covered option |
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