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Glossary Term: COVERED STRADDLE

Definition(s) for COVERED STRADDLE:


1. ) The terminology used to describe the technique in which an investor owns the underlying security and also writes a straddle on that security. This is not really a covered position.

2. ) 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 actuality, this is not a covered strategy because asignment on the short put would require purchase of stock on margin. This method is also known as a covered combination.

3. ) An option strategy in which one call and one put with the same strike price and expiration are written against each 100 shares of the underlying stock. Example: writing 1 XYZ May 60 call and 1 XYZ May 60 put, and buying 100 shares of XYZ stock. In actuality, this is not a fully 'covered' strategy because assignment on the short put would require purchase of additional stock.



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