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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.

Investing Essentials


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

Term of the Day

Interest rate parity theorem

Expression that the interest rate differential between two countries is equal to the difference between the forward foreign exchange rate and the spot rate.

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