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Covered Put

A put option position in which the option buyer is also short the corresponding stock or has deposited cash or cash equivalents equal to exercising the option. This limits the buyer’s risk because money or stock is already set aside.

The strategy that involves selling one put against the short sale of 100 shares of stock.

Additional Comments:

In the event the holder of the put option decides to exercise the option, the buyer’s risk is more limited than with an uncovered or naked put option.

Related Terms:

Covered Call
A strategy that involves buying stock shares and selling calls. If the calls are assigned, the ...

Uncovered Option
A short position where the writer does not have the underlying security (or call option) to ...

An option is a type of derivative - its value is derived from an underlying asset, ...

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