Covered Put

Similar financial terms

Covered calls
A call option that is sold when the seller also owns 100 shares of the underlying stock.

Uncovered put
A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.

Uncovered call
A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price.

Covered call
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.

Covered call writing strategy
A strategy that involves writing a call option on securities that the investor owns in his or her portfolio. See covered or hedge option strategies.

Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for dollars.

Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the underlying stock, designed so that one position will help offset any unfavorable price movement in the other, including covered call writing and protective put buying.

Put provision on bonds
A put provision grants the bondholder the right to sell the issue back to the issuer at par value on designated dates. Here the advantage to the investor is that if interest rates rise after the issue date, thereby reducing a bond’s price, the investor can force the issuer to redeem the bond at par value.

Transferable put right
An option issued by the firm to its shareholders to sell the firm one share of its common stock at a fixed price (the strike price) within a stated period (the time to maturity). The put right is "transferable" because it can be traded in the capital markets.

Throughput agreement
An agreement to put a specified amount of product per period through a particular facility. For example, an agreement to ship a specified amount of crude oil per period through a particular pipeline.

Put-call parity relationship
The relationship between the price of a put and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the stock and buying a put will deliver the exact payoff as buying one call and investing the present value (PV) of the exercise price. The call value equals C=S+P-PV(k).

Put swaption
A financial tool in which the buyer has the right, or option, to enter into a swap as a floatingrate payer. The writer of the swaption therefore becomes the floating-rate receiver/fixed-rate payer.

Put provision
Gives the holder of a floating-rate bond the right to redeem his note at par on the coupon payment date.

Put price
The price at which the asset will be sold if a put option is exercised. Also called the strike or exercise price of a put option.

Put option
This security gives investors the right to sell (or put) fixed number of shares at a fixed price within a given time frame. An investor, for example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment.

Put bond
A bond that the holder may choose either to exchange for par value at some date or to extend for a given number of years.

Put an option
To exercise a put option.

Put
An option granting the right to sell the underlying futures contract. Opposite of a call.

Protective put buying strategy
A strategy that involves buying a put option on the underlying security that is held in a portfolio.

Poison put
A covenant allowing the bondholder to demand repayment in the event of a hostile merger.

Computer-Intergrated Manufacturing (CIM)
The intergration of computer control and monitoring into a manufacturing process.