A strategy in which one sells put options and simultaneously is short an equal number of shares of the underlying security.
Cover: To close out an open position - to buy back as a closing transaction an option that was initially written. This term is used to describe the purchase of an option or stock to close out an existing short position for either a profit or loss.
Covered: A written option is considered to be covered if the writer also has an opposing market position on a share-for-share basis in the underlying security. That is, a short call is covered if the underlying stock is owned, and a short put is covered (for margin purposes) if the underlying stock is also short in the account. In addition, a short call is covered if the account is also long another call on the same security, with a striking price equal to or less than the striking price of the short call. A short put is covered if there is also a long put in the account with a striking price equal to or greater than the striking price of the short put.
Covered Put: Cash secured put is an option strategy in which a put option is written against a sufficient amount of cash (or T-bills to pay for the stock purchase if the short option is assigned).
Put: An option contract that gives the holder the right to sell the underlying security at a specified price for a certain fixed period of time.