Covered Call Option Writing

A technique used by investors to help fund their underlying positions, typically used in the equity markets. An individual who sells a call is said to “write” the call. If this individual sells a call on a notional amount of the underlying that he has in his inventory, then the written call is said to be “covered” (by his inventory of the underlying). If the investor does not have the underlying in inventory, the investor has sold the call “naked”.