WHAT ARE COVERED PUTS AND COVERED CALLS? - ProProfs Discuss
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What are covered puts and covered calls?



Asked by Logan, Last updated: May 24, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

A covered put position entails writing puts and selling short an equivalent amount ofthe underlying stock. a covered call position entails writing calls and buying anequivalent amount of the underlying stock.you have to keep in mind that covered really means that if the option buyer decided toexercise his or her option, any action you have to take will merely be an offsetting of aposition youve already established.in a covered call, if you have to sell shares to the option holder who exercises, youmerely sell the shares you already own, offsetting your original stock transaction.in a covered put, if you have to buy shares from the option holder who exercises, youmerely buy the shares and this offsets your original short sale position.
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