A mutual fund where the money managers write covered calls on the securities in the fund. This allows the fund to profit from the collection of the premiums while eliminating the risk that it will lose on the option transaction. In the worst case scenario, it must sell a security in its portfolio when an option is exercised. Most of the time, the options are not exercised and the fund simply increases its income with the premiums.
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A mutual fund that attempts to increase current income by writing covered call options on securities held in the fund's portfolio.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.