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Finance Dictionary and Glossary of Investment Terms
Covered put
Definition 1.
A put option position in which the option writer also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to theexercise of theoption. This limits the option writer's risk because money or stock is already set aside. In the event that the holder of the put option decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put option.
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Definition 2.
The selling of a put option while being short an equivalent amount in the underlying security.
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