Covered call

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Covered call

A 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

A position in which an investor short sells or writes an option contract, giving the buyer the ability to buy the underlying asset on demand while also owning the underlying asset. For example, an investor has a covered call position when he writes a call for 100 shares of AT&T and owns at least 100 shares of AT&T. This means that if the holder of the call exercises the option, the investor will be able to sell the shares without a problem. Investors often use a covered call strategy when they do not expect the option to be exercised and simply want to collect the premiums without exposing themselves to the risk of loss if the option is actually exercised.
References in periodicals archive ?
Credit Suisse said it has declared coupon payments on covered calls of ETNs for the company's gold shares (NASDAQ: GLDI) and silver shares (NASDAQ: SLVO).
From the examples in this article, you can see both the pros and cons of covered calls.
Written by a successful stock options investor of eighteen years' experience, Covered Calls and Naked Puts is a straightforward guide to low-risk opportunities in the options market.
If you are willing to sell your stock at a designated price, you can sell covered calls against your stock position.
Some financial products, such as stocks, are bundled by corporations; some, such as listed stock options, are bundled by exchanges; and some, such as covered calls, are bundled by investors, typically with the help of brokers.