How Do You Spell COVERED CALL?

Pronunciation: [kˈʌvəd kˈɔːl] (IPA)

The term "COVERED CALL" refers to a financial strategy where an investor sells call options on assets they already own. The phonetic transcription of the word "COVERED CALL" is ['kʌvərd kɔːl], with each letter representing a unique sound. The emphasis is on the first syllable, pronounced "kuv-ud". The "C" in CALL is pronounced like a "K". This spelling helps investors to differentiate between "CALL" options and "PUT" options, which have different payouts and risk levels. A "COVERED CALL" is considered a conservative option strategy, ideal for investors seeking steady income in a low-risk environment.

COVERED CALL Meaning and Definition

1. A covered call refers to a strategy used in stock market investing, whereby an investor owns the underlying stock (usually 100 shares of a particular stock) and simultaneously sells a call option on that same stock. This strategy involves writing a call option on stocks that are already held in an investor's portfolio, with the intention of generating additional income and protection against a potential decline in stock price.

   By selling the call option, the investor receives a premium from the buyer, which represents income in their portfolio. In return for this premium, the investor agrees to sell their shares of stock at a predetermined price, known as the strike price, if the buyer of the option exercises their right to buy the stock before the option's expiration date.

   The call option is referred to as "covered" because the investor has already acquired the underlying stock to fulfill the obligations of the call contract. This limits the investor's potential profit if the stock price increases significantly, as they would have to sell their shares at the predetermined strike price. However, if the stock price remains relatively unchanged or decreases, the investor can still keep the premium received from selling the call option.

   Overall, a covered call strategy can be used to generate additional income from an investor's stock holdings while potentially providing a cushion against stock price declines.

Common Misspellings for COVERED CALL

• xovered call
• vovered call
• fovered call
• dovered call
• civered call
• ckvered call
• clvered call
• cpvered call
• c0vered call
• c9vered call
• cocered call
• cobered call
• cogered call
• cofered call
• covwred call
• covsred call
• covdred call
• covrred call
• cov4red call
• cov3red call

Etymology of COVERED CALL

The word "covered call" originates from the world of finance and options trading.

The term "call" refers to a type of financial derivative known as an "option". An option gives the purchaser the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specific time period.

The word "covered" in "covered call" refers to the fact that the writer (seller) of the call option owns the underlying asset (such as stocks) that is being offered for sale. By owning the underlying asset, they are "covered" or have the ability to deliver it if the option is exercised by the buyer.

Therefore, a "covered call" involves the sale (writing) of a call option on an underlying asset that the seller already owns. The seller is said to be "covered" because they have the asset available for delivery if needed.