Letter of Guarantee


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Letter of Guarantee

A letter from a bank to a brokerage firm which states that a customer (who has written a call option) does indeed own the underlying stock and the bank will guarantee delivery if the call is assigned. Thus the call can be considered covered. Not all brokerage firms accept letters of guarantee. Also: letter issued to Option Clearing Corporation by member firms covering a guarantee of any trades made by one of its customers, (a trader or broker on the exchange floor).

Letter of Guarantee

In call options, a guarantee of delivery of securities made by a bank to a brokerage on behalf of the bank's client. When an investor is writing a call option and does not have the underlying asset in his/her brokerage account, the brokerage may require a letter of guarantee in order to eliminate the risk that the investor will not deliver the securities should the call be exercised.

letter of guarantee

A letter from a bank stating that a customer owns a particular security and that the bank will guarantee delivery of the security. A letter of guarantee is used by an investor who is writing call options when the underlying stock is not in his or her brokerage account.
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References in periodicals archive ?
He requested the letter of guarantee that the SEAG Federation needs through Presidential Executive Secretary Salvador Medialdea.
If you sell your car, you have to go to court to make a letter of guarantee for anyone who buys that car later on, and this may happen several times," he complained.
The original validity period of the letter of guarantee is set at twelve (12) months from the date of opening.
In case of bidding for part of the requested materials contestants must submit a Participation Letter of Guarantee (EES) an amount equal to at least 2% of the value of the offered material with maximum amount specified above for the whole commission.
- A letter of guarantee 440,00 EUR value of participation in case of offer one kind (10).
- A letter of guarantee 960,00 EUR value participation in the case of type 2 supply (20).
- A letter of guarantee worth 1 560,00 EUR participation in case of offer type 3 (30).
- A letter of guarantee value participation 1 440,00 EUR in the case of type 4 offer (40).
- A letter of guarantee 840,00 EUR value of participation in the event of its kind offer five (50).
- A letter of guarantee 440,00 EUR value of participation in the event of its kind offer six (60).