Super Finance Glossary
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Covered Or Hedge Option Strategies
Definition: Strategies that involve a position in an option as well as a position in the underlying stock, designed so that one position will help offset any unfavorable price movement in the other, including covered call writing and protective put buying. Related: Naked strategies
Definition: Strategies that involve a position in an option as well as a position in the underlying stock, designed so that one position will help offset any unfavorable price movement in the other, including covered call writing and protective put buying. Related: Naked strategies
Covered Position
Definition: Use of an option in a trading strategy in the underlying asset which is already owned.
Definition: Use of an option in a trading strategy in the underlying asset which is already owned.
Covered Put
Definition: 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 the exercise price of the option. 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.
Definition: 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 the exercise price of the option. 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.
Covered Straddle
Definition: 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 purchase of stock on margin. This method is also known as a covered combination.
Definition: 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 purchase of stock on margin. This method is also known as a covered combination.
Covered Straddle Write
Definition: The term used to describe the strategy in which an investor owns the underlying security and also writes a straddle on that security. This is not really a covered position.
Definition: The term used to describe the strategy in which an investor owns the underlying security and also writes a straddle on that security. This is not really a covered position.
Covered Writer
Definition: An investor who writes options only on stock that he or she owns, so that option premiums may be collected.
Definition: An investor who writes options only on stock that he or she owns, so that option premiums may be collected.
Covering
Definition: Using forward currency contracts to predetermine the domestic currency amount of an expected future foreign receipt or payment. Also, the buying back ('covering') of a short position.
Definition: Using forward currency contracts to predetermine the domestic currency amount of an expected future foreign receipt or payment. Also, the buying back ('covering') of a short position.
Cox-Ross-Rubinstein Option Pricing Model
Definition: An option pricing model developed by John Cox, Stephen Ross, and Mark Rubinstein that can be adopted to include effects not included in the Black-Scholes Model (e.g., early exercise and price supports).
Definition: An option pricing model developed by John Cox, Stephen Ross, and Mark Rubinstein that can be adopted to include effects not included in the Black-Scholes Model (e.g., early exercise and price supports).
Crack Spread
Definition:
Definition:
(1) In energy futures, the simultaneous purchase of crude oil futures and the sale of petroleum product futures to establish a refining margin. See Gross Processing Margin.
(2) Calculation showing the theoretical market value of petroleum products that could be obtained from a barrel of crude after the oil is refined or cracked. This does not necessarily represent the refining margin because a barrel of crude yields varying amounts of petroleum products.
Cram-down Deal
Definition: A merger in which stockholders are forced to accept undesirable terms, such as junk bonds instead of cash or equity, due to the absence of any better alternatives.
Definition: A merger in which stockholders are forced to accept undesirable terms, such as junk bonds instead of cash or equity, due to the absence of any better alternatives.
Cramdown
Definition: The ability of the bankruptcy court to confirm a plan of reorganization over the objections of some classes of creditors.
Definition: The ability of the bankruptcy court to confirm a plan of reorganization over the objections of some classes of creditors.
Crash
Definition: Dramatic loss in market value. The last great crash was in 1929. Some refer to October 1987 as a crash but the market return for the entire year of 1987 was positive.
Definition: Dramatic loss in market value. The last great crash was in 1929. Some refer to October 1987 as a crash but the market return for the entire year of 1987 was positive.
Crawling Peg
Definition: An automatic system for revising the exchange rate. It involves establishing a par value around which the rate can vary up to a given percent. The par value is revised regularly according to a formula determined by the authorities.
Definition: An automatic system for revising the exchange rate. It involves establishing a par value around which the rate can vary up to a given percent. The par value is revised regularly according to a formula determined by the authorities.
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