Covered call

Definition:

A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at the market price, if the holder of that option decides to exercise it.

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Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Multirule system

A technical trading strategy that combines mechanical rules, such as the CRISMA (cumulative volume, relative strength, moving average) Trading System of Pruitt and White.

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