Covered put

Definition:

A put option position in which the option writer also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to the exercise price of the option. This limits the option writer's risk because money or stock is already set aside. In the event that the holder of the put option decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put option.

Investing Essentials


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

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Trade credit

Credit one firm grants to another firm for the purchase of goods or services. That is, when the goods are delivered, the recipient does not have to pay immediately for the goods - a credit is given... Read More

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