Covered Combination

An option strategy that involves the simultaneous sale of an out-of-the-money call and a put with the same expiration date on a security owned by the investor. In other words, it is a combination of a covered call and a short put position. The strategy enables the investor to receive premium income through the sale of the call and the put, in exchange for taking on the risk of doubling his or her position in the stock should its price decline below the strike price of the put by the expiration date.

For example, an investor who owns a stock S that is trading at $30 sells a call option on S with a strike price of $33 and simultaneously also sells a put option on S with a strike price of $28, with both the call and the put expiring in three months.

Covered combinations are used by investors who are moderately bullish on a stock and are comfortable with doubling their position in the event of a price decline. It is also used by investors who are looking for additional levels of premium income to enhance their rate of return on a stock or portfolio.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Covered bridge — The Cogan House Covered Bridge over Larrys Creek, Cogan House Township, Pennsylvania, U.S. Ancestor Truss bridge, others …   Wikipedia

  • covered straddle — An option strategy in which one call and one put with the same strike price and expiration are written against 100 shares of the underlying stock. In actually, this is not a covered strategy because assignment on the short put would require… …   Financial and business terms

  • Waldo Covered Bridge — Infobox Bridge bridge name=Waldo CB caption=The Waldo Covered Bridge near Talladega, Alabama. official name= carries=bridge inaccessible crosses=Talladega Creek locale=Waldo, Alabama maint=PRIVATE USE id=01 61 02 (WGCB) design=Howe truss and… …   Wikipedia

  • Old Union Crossing Covered Bridge — Old Union Crossing CB The Old Union Crossing Covered Bridge near Mentone, Alabama. Carries single lane motor traffic Crosses West Fork of the Little River …   Wikipedia

  • Swann Covered Bridge — Infobox nrhp | name = Swann CB nrhp type = caption = The Swann Covered Bridge near Cleveland, Alabama. nearest city = Cleveland, AL lat degrees = 33 | lat minutes = 59 | lat seconds = 51.35 | lat direction = N long degrees = 86 | long minutes =… …   Wikipedia

  • Easley Covered Bridge — Easley CB The Easley Covered Bridge near Rosa, Alabama. Carries bridge closed to motor traffic Crosses Dub Branch, Calvert Prong of the Little Warrior River …   Wikipedia

  • Nectar Covered Bridge — Nectar CB Two stone piers remain where the Nectar Covered Bridge once stood. The bridge burned down in 1993. Carries single lane motor traffic Crosses Locust Fork of the Black Warrior River …   Wikipedia

  • Kymulga Mill & Covered Bridge — Infobox nrhp | name = Kymulga Mill nrhp type = caption = Kymulga Mill near Childersburg, Alabama. nearest city = Childersburg, AL lat degrees = 33 | lat minutes = 20 | lat seconds = 2.38 | lat direction = N long degrees = 86 | long minutes = 17 | …   Wikipedia

  • Bridgeport Covered Bridge — Infobox Bridge bridge name = View of the Bridgeport Covered Bridge caption = official name = carries = Pedestrian crosses = South Yuba River locale = maint = id = design = Covered Bridge mainspan = length = convert|251|ft width = height = load =… …   Wikipedia

  • countline — countˈline adjective and noun (of) a confectionery bar made as an individual line (eg a filled or chocolate covered combination bar) as distinct from moulded chocolate • • • Main Entry: ↑count …   Useful english dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.