covered option

covered option definition - finance
An option contract where the person writing the option protects him- or herself by owning the underlying shares. In contrast, when the writer doesnÂ’t own the shares, it is called a naked option, and the shares may have to be purchased at an unfavorable price in the market in order to deliver them.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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