Business and Personal Finance Dictionary

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• COVERED OPTION
  
  When you sell options on stocks that you own, they're known as covered options. That means, at the very worst, if someone exercises the option, you can turn over the stocks you own to meet your obligation to sell. One appeal of selling a covered option is that you collect the premium and don't risk unexpected losses caused by having to buy the stock at market price in order to meet your obligation to sell. Selling options is also a technique for receiving income from stocks that pay few or no dividends.
  
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