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Covered Call

Covered Call Definition

Covered Call is a strategy in which the seller of call options owns the equivalent number of shares   of the underlying instrument at the same time. If the security is purchased simultaneously with writing the call contract, the transaction is referred to as a "buy-write." If the shares are already held, it is an "overwrite." The long position in the underlying instrument provides the "cover" as the shares can be delivered to the buyer of the call if he decides to exercise.




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