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Covered put

• 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 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.

 
 Embedded terms in definition
 Cash account
Cash equivalent
Cash
Event
Exercise
Option writer
Option
Position
Put option
Put
Risk
Short
Stock
Writer
 
 Related Terms
 

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