covered option meaning

Noun: covered option

1. A put or call option backed by the shares underlying the option

Derived forms: covered options

Type of: option

[Finance]
Option position that is offset by an equal and opposite position in the underlying security. Antithesis of naked option.

• covered or hedge option strategies:    [Finance]Strategie ...
• covered:    Adjective: covered ...
• option:    Noun: option  ...

Examples

1. Investors can limit their risk by writing call options on securities they already own, known as covered options.
2. For example, an investor who owns 500 shares of Barrick and sells five Barrick call options is in a covered option position.
3. That price covered options, but it was a short list, including air-conditioning ( $ 900 ), stereo system with cassette player ( $ 605 ) and power steering ( $ 260 ).
4. NATO officials said the planning covered options from large-scale air strikes against Serbian air defenses and other strategic sites all over Yugoslavia, through moving peacekeeping troops or monitors onto the border between Albania and Kosovo.
5. That's still a high payout level for a stock fund, which this one manages by maintaining a portfolio of companies with above-average payouts, and also by habitually selling call-covered options.