Covered Call
A covered call is an income generating strategy where an investor holds the underlying stock and sells calls against it. The stock serves as collateral for the short call.
If the stock stays below the strike, the writer keeps the premium and the stock. If it goes above, the stock may be called away.
It is a popular way to earn extra returns on a long stock position.
Glossary
Time Decay
Phenomenon ⎊ Time decay, also known as theta, is the phenomenon where an option's extrinsic value diminishes as its expiration date approaches.
Call Option
Contract ⎊ A call option is a standardized derivative contract that grants the holder the right to purchase an underlying asset at a pre-determined strike price.
P&L Profile
Analysis ⎊ A P&L profile is a graphical representation used in financial analysis to illustrate the potential profit or loss of a derivatives position across various price scenarios for the underlying asset.
Long Call
Position ⎊ A long call represents a bullish options position where the holder purchases the right to buy an underlying asset at a predetermined strike price.
Oracle Call Expense
Cost ⎊ Oracle Call Expense represents the premium paid to secure a verifiable, off-chain data point delivered to a smart contract, crucial for decentralized finance applications.
Long Call Position
Position ⎊ The act of acquiring a call option, granting the holder the right, but not the obligation, to purchase the underlying crypto asset or derivative at a specified strike price on or before the expiration date.
Periodic Call Auction
Action ⎊ A periodic call auction represents a discrete trading mechanism utilized in cryptocurrency exchanges and derivatives markets, functioning as a centralized order matching event at predetermined intervals.
Call Option Selling
Obligation ⎊ Selling a call option creates a contractual obligation for the seller to deliver the underlying asset at the strike price if the option is exercised by the buyer.
Opportunity Cost
Decision ⎊ Opportunity cost in derivatives analysis is the value of the next best alternative investment or trade that must be forgone when capital is allocated to a specific position.
Margin Call Acceleration
Dynamic ⎊ This refers to the system logic that shortens the time allowed for a trader to meet an increased margin requirement when market volatility or the position's risk profile deteriorates rapidly.