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Covered call
       
 
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Covered call

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Covered call
To sell a call Option while owning the Underlying Security on which the Option is written. The technique is used by fund managers to increase income by receiving Option Premium. It would be used for securities they are willing to sell, only if the Underlying went up sufficiently for the Option to be exercised. Generally, covered call writers would undertake the strategy only if they thought Volatility was overpriced in the market. The lower the Volatility, the less the covered call Writer gains in return for giving up upside in the Underlying. It provides downside protection only to the extent that the Option Premium offsets a market downturn.

See also Covered put
Posted by  Privatebanking.com
 
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