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Covered |
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CoveredA written option is considered to be covered if the writer also has an opposing market position on a share-for-share basis in the underlying security. That is, a short call is covered if the underlying stock is owned, and a short put is covered (for margin purposes) if the underlying stock is also short in the account. In addition, a short call is covered if the account is also long another call on the same security, with a striking price equal to or less than the striking price of the short call. A short put is covered if there is also a long put in the account with a striking price equal to or greater than the striking price of the short put.Covered Similar MatchesUncovered 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 arbitrageOccurs when a portfolio manager invests dollars in an instrument denominated in a foreign currency and hedges the resulting foreign exchange risk by selling the proceeds of the investment forward for dollars. Covered call writing strategyCovered call writing strategyA strategy that involves writing a call option on securities that the investor owns. See: Covered or hedge option strategies. 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 SuggestionsCovered optioncovered straddle Covered call Uncovered Put writing Covered interest rate Covered writer covered writing uncovered Covered or hedge option strategies Uncovered options Covered interest parity Covered position Covered Straddle Write Uncovered call writing covered warrant Covered position Covered Interest Rate Parity Covered interest arbitrage |
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