Investor Glossary-covered callInvestor Glossary-covered callInvestor Glossary-covered callInvestor Glossary-covered callInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Covered Call

The HTML to link to this page
 

A covered call is a short call option which is backed -- or covered -- by sufficient pre-purchased shares of the underlying stock. An investor's risk is limited when selling (or writing) a covered called since the investor already owns sufficient stock to cover the option if the covered call is exercised. By selling a covered call an investor is attempting to capitalize on a neutral or declining price in the underlying stock. When a covered call expires without being exercised (as would be the case in a declining or neutral market), the investor keeps the premium generated by selling the covered call. Selling (writing) a covered call is considered so safe that covered call writing is permitted in most self-directed IRA accounts. The opposite of a covered call is a naked call, where a call is written without pre-purchased stock shares to cover the call if it is exercised.



Rate this covered call definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: ex-dividend, debt service coverage, required rate of return, annual return, FTSE, margin rate, 1035 exchange, Key Rate Duration, FICO score, inflation, quality assurance, option premium, 1031 exchange, current ratio, minority interest, wholly-owned subsidiary, average price per share, phantom income, VIX, EBITDA, in escrow, risk management, diluted share, deferred tax, ex-dividend date, reverse mortgage, deferred revenue, cancelled check, real GDP, per diem, command economy, stock split, stock market close, Zero Cost Collar, dividends payable, class C shares, retained earnings, balance sheet, labor relations, liquidity ratio, APR, 144a, open position, covered put, implied volatility, limit order, 401a, LIBOR, irrevocable trust


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use