InvestorWords.com

covered call 

The selling of a call option while simultaneously holding an equivalent position in the underlier. This is an attempt to take advantage of a neutral or declining stock. If the option expires unexercised, the writer keeps the premium. If the holder exercises the option, the stock must be delivered, but, because the writer already owns the stock, risk is limited. This is the opposite of an uncovered call, when the writer sells a call for a stock that he/she does not already own, a dangerous strategy with unlimited risk.

This content can be found on the following page:

Copyright©1997-2008 by InvestorWords.com. ALL RIGHTS RESERVED.

Reproduction of all or part of this glossary and/or this page, in any format, without written consent is prohibited. If you have questions about this dictionary please feel free to contact us feedback@investorguide.com

Copy and paste this HTML in your website to link to this page    <a href="http://www.investorwords.com/1183/covered_call.html">covered call</a>