covered call writing

Quick Reference

Selling (writing) a call option on assets one owns. Thus, if the manager of a portfolio expects the price of a certain holding in the portfolio to remain unchanged or to fall, he or she can increase the portfolio income by the amount of the premium received for the call option sold. If the asset price rises the manager has to deliver it at the exercise price. Compare naked call writing. See also buy and write.

Subjects: Financial Institutions and Services.

Reference entries