covered put option

Covered Put Option

A situation in which an investor writes an option while holding an equal and opposite position on the underlying asset. A covered call option occurs when the investor owns the underlying asset and writes a call so that the underlying is on hand to sell to the option holder if the option is exercised. A covered put option occurs when the investor writes a put and has enough cash to cover the strike if the put is exercised. It is thought that utilizing covered options is a beneficial tactic as the investor may profit from the option premium.

covered put option

A put option sold short by an investor who is short the underlying stock. If the put is later exercised, the investor will be required to purchase the underlying stock from the holder of the put. The stock will then be used to cover the short position in the stock.
References in periodicals archive ?
In addition, the Fund may write cash covered put options in respect of securities in which the Fund is permitted to invest.
the Option Advisor, may at its discretion selectively write covered call and cash covered put options to generate additional distributable income for the Fund.
In addition, the Company may write cash covered put options in respect of securities in which the Company is permitted to invest.