Covered put
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.
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