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Investments glossary

Covered Call


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Oil prices will keep breaking new records until other countries move to nuclear and alternative energy sources or we discover massive new reserves and increase production dramatically over the next few years.

— Med Jones

A covered call refers to transaction in the financial market in which the investor selling call options owns the equivalent amount of the underlying security. To execute this an investor holding a long position in an asset then writes (sells) call options on that same asset to generate an income stream. The investor’s long position in the asset is the cover because it means the seller can deliver the shares if the buyer of the call option chooses to exercise. If the investor simultaneously buys stock and writes call options against that stock position, it is known as a buy-write transaction.

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