Covered Option

This Issue in United States

Concept of Covered Option in Futures Trading

In this context of financial law, the following is a definition of Covered Option: A short call or put option position that is covered by the sale or purchase of the underlying futures contract or other underlying instrument. For example, in the case of options on futures contracts, a covered call is a short call position combined with a long futures position. A covered put is a short put position combined with a short futures position.

Covered Option

Concept of Covered Option in the context of derivatives contract, by the International Swaps and Derivatives Association (ISDA): A written option which is matched by an opposing cash or stock position in the underlying asset, or by an opposing option position of specific characteristics.

Resources

See Also

• Derivatives Contract