Covered call option defined

Options spread instruments may be user defined and identified as either exchange recognized or exchange unrecognized. An exchange recognized options spread is a known, historically traded options spread configuration; for example, the butterfly spread represents buy 1 sell 2 buy 1 of the given instrument at a defined strike interval and identical expiration.

An exchange recognized spread type submitted for creation by CME Globex platform is acknowledged and disseminated as such in the market data Security Definition message. All options spread types are available for all options products on CME Globex with some exceptions, for example:. Option Strip Spread GD - energy options only. Conditional Curve CC - Eurodollar options only.

Reduced Tick Inter-Commodity Option Spread EO - natural gas options only. An unrecognized spread type does not conform to any known options spread configuration and is acknowledged and disseminated as 'Generic' GN in the market data Security Definition message. For additional information, see User Defined Spread - UDS. A horizontal HO options spread consists of buying a call put at a strike in the far month, and selling a call put at the same strike in the near month.

A Straddle ST options spread consists of buying both a call and put option on the same instrument, strike price and expiration date. A Strangle SG options spread consists of buying a put at a lower strike price and buying a call at a higher strike price within the same instrument and expiration.

Covered Call Definition & Example | Investing Answers

A Vertical VT options spread is made up of all calls or all puts and consists of buying a call at a strike price and selling a call at a higher strike price or buying a put at a strike price and selling a put at a lower strike price within the same instrument and expiration date.

A Box BX options spread consists of buying the call and selling the put at the same lower strike price and buying the put and selling the call at the same higher strike all within the same instrument and expiry month. Buy1callstrike1exp1 Sell1putstrike1exp1 Buy1putstrike2exp1 Sell1callstrike2exp1.

A Butterfly BO options spread is constructed of all calls Call Butterfly or all puts Put Butterfly. The Call Butterfly consists of buying a call, selling two calls at a higher strike price and buying a call at a still higher strike price within the same instrument and expiry month.

The Put Butterfly consists of buying a put, selling two puts at a lower strike price and buying a put at a still lower strike price within the same instrument and expiry month. The Butterfly requires a specific symmetry in the strikes in that the difference between the strike prices is the same for all legs.

Conditional Curve CC options spreads are unique to CME Group Interest rate products and consists of buying a call put at a strike in one product group and selling a call put at a strike in another product group.

Additionally, it is possible to have a Conditional Curve spread with a single strike i. Call Conditional Curve Construction: The Call Condor consists of buying a call, selling one call at a higher strike price and selling a call at a still higher strike price, and buying a fourth call at a still higher strike price within the same instrument and expiry month.

The Put Condor consists of buying a put at the highest strike price, selling one put at a lower strike price, selling a put at a still lower strike price, and buying a fourth put at an even lower strike price within the same instrument and expiry month.

The Condor requires a specific symmetry in the strikes in that the difference between the strike prices is the same for all legs. The Call Double consists of buying a call at a strike price and buying another call at a higher strike price within the same instrument and expiry month.

Covered call - Wikipedia

The Put Double consists of buying a put at a strike price and buying another put at a lower strike price within the same instrument and expiry month.

A Horizontal Straddle HS options spread consists of buying a straddle at one strike price in the deferred month and selling a straddle at the same or different strike in the near month. More specifically, a Horizontal Straddle HS consists of buying a call and buying a put at the same strike price in the deferred month and selling a call and selling a put at the same lower strike price in the near month, all within the same instrument and expiry month.

Buy1callstrike1exp2 Buy1putstrike1exp2 Sell1callstrike1exp1 Sell1putstrike1exp1. More specifically this consists of selling a put at one strike price, buying a put at a higher strike price, buying a call at a higher strike price, and selling a call at an even higher strike price, all within the same instrument and expiration. Sell1putstrike1exp1 Buy1putstrike2exp1 Buy1callstrike3exp1 Sell1callstrike4exp1.

A Ratio 1x2 12 options spread is constructed of all calls Call Ratio 1x2 or all puts Put Ratio 1x2. The Call Ratio 1x2 consists of buying a call and selling two calls at a higher strike price within the same instrument and expiry month.

The Put Ratio 1x2 consists of buying a put at a strike price and selling two puts at a lower strike price within the same instrument and expiry month. A Ratio 1x3 13 options spread is constructed of all calls Call Ratio 1x3 or all puts Put Ratio 1x3. The Call Ratio 1x3 consists of buying a call at one strike price and selling three calls at a higher strike price within the same instrument and expiry month. The Put Ratio 1x3 consists of buying a put at one strike price and selling three puts at a lower strike price within the same instrument and expiry month.

A Ratio 2x3 23 options should i buy cvs stock is constructed of all calls Call Ratio 2x3 or all puts Put Ratio 2x3. The Call Ratio 2x3 consists of buying two calls at one strike and selling three calls at a higher strike price within the same instrument and expiry month.

The Put Ratio 2x3 consists of buying two puts at one strike price and selling three puts at a lower strike price within the same instrument and expiry month. The Kelas forex di johor bahru Strip consists of buying calls within the same instrument and strike price for four equidistant expiry months, resulting in a total of four 4 calls purchased.

The Put Strip consists of buying puts within the same instrument and strike price for each of four equidistant expiry months, resulting in a total of four 4 puts purchased. The Strip requires a specific symmetry in the expiry months in that the time difference between the expiry months is the same for all legs.

A Risk Reversal RR options spread consists of buying a call and selling a put option within the same instrument and expiration month. The GD Strip Spread is the simultaneous purchase or sale of SA Strips at the sum of the SA Strip legs. The SA Strip legs are priced according to the SA Strip rules. CME Globex recognizes a new UDS as a GD Strip Spread if the legs are submitted as outrights or if they are submitted as a recursive spread, even if the spread legs are not forex arbitrage ea software free download as SA Strips.

For example, a recursive UDS with two Forex economic indicator releases Vertical legs will be recognized as a GD Strip Spread if the legs of the VT Verticals follow the SA Strip rules above. The Xmas Tree XT options spread is constructed of all calls Call Xmas Tree or all puts Put Xmas Tree.

The Call Xmas Tree consists of buying a call at one strike, selling a call at a higher strike and selling yet another call at a higher strike, all within the same instrument and expiration month. The Put Xmas Tree consists of buying a put at a higher strike and selling a put at a lower strike and selling yet another put at a still lower covered call option defined, all within the same instrument and expiration month.

The Xmas Tree requires a specific symmetry in the strikes in that the difference between the strike prices is the same for all legs.

Call Xmas Tree Construction: Put Xmas Tree Construction: A 3-Way 3W options spread is constructed of calls and puts on the same instrument buy credit event binary options expiry month with different strike prices.

A Call 3-way consists of buying the call for the middle strike price, selling the call for high strike price, and selling the put for the low trading system set and forget price.

A Put 3-way consists of buying the put for middle strike price, selling the put for low strike price, and selling the call for the high strike price. Straddle versus Call 3C options spread consists of buying a Straddle and versus selling a Call in the same expiry month.

The Straddle component consists of buying a Call and buying a Put in the same instrument, expiration, and strike price. The opposing versus component is to sell a Call for the same instrument and expiration but at a different strike price. Straddle versus Call 3C options spread consists of buying a Straddle and selling a Put in the same expiry month.

The opposing component is to sell a Put for the same instrument and expiration but at a different strike price.

An Iron Butterfly IB options spread consists of buying a Straddle and selling a Strangle in the same expiry month. The IB components are to sell a Put at a strike price, buy Put and Call at higher strike price, and sell a Call at an even higher strike price. The strike prices do not have to be consecutive and the gaps between strike prices do not have to be equal. Sell1putstrike1exp1 Buy1putstrike2exp1 Buy1callstrike2exp1 Sell1callstrike3exp1.

A Jelly Roll JR is created by entering into two separate positions simultaneously. The first position involves buying a put and selling a call with the same strike price and expiration. The uob myr exchange rate position involves selling a put and buying a call. The strike prices of the put and call in the second position are identical but differ from the first position, and the duration of the second position is longer than the first position.

This overall position creates a synthetic near-term short position and long-term long position that work to capitalize upon the time differential between underlying futures prices. Buy Jelly Roll Construction: Sell1callstrike1exp1 Buy1putstrike1exp1 Buy1callstrike2exp2 Sell1putstrike2exp2. Sell Jelly Roll Construction: Buy1callstrike1exp1 Sell1putstrike1exp1 Sell1callstrike2exp2 Buy1putstrike2exp2. A Guts GT options spread consists of buying a Call at a strike price and buying a Put at a higher strike price in the same expiry.

The SA Strip is the simultaneous purchase or sale of futures or options positions at the averaged price of the legs; the spread price is identical to the price assigned to each leg. SA is available in futures and options markets in both Exchange- and User-Defined spreads.

The CV Covered is the simultaneous purchase or sale of outright options or options spreads with one or more outright futures; for example, buying call options and selling futures or selling put options and selling futures. The creator of the UDS is responsible for defining the direction, delta, price, and expiration of the futures leg s.

Covereds pricing and leg assignments follow the rules of the options leg; i. For UDS creation, a Reduced Tick Inter-Commodity Option Spread EO spread consists of buying one American Natural Gas Option ON and selling one European Natural Gas Option LNE with a reduced tick.

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The legs can have a mixture of sides and strip lengths. Option Strip Spreads GD are priced as the sum of each average priced 'sub-strip. Then each buy strip is added and each sell strip is subtracted to calculate the fair value price. If the options spread requested by the user is not identified as one of the CME Globex exchange recognized spread types, but has a valid construction, the instrument will be created exactly as the user requested and designated in market data as 'GN' generic.

Under the generic designation, the user can create options spread instruments composed of multiple spread types. For example, a unique options spread instrument can be created by combining the configurations of a Vertical options spread and Xmas tree options spread into a unique Generic instrument. Generic spreads can contain up to 26 outrights. This count is irrespective of leg ratio.

For additional information, see User-Defined Spread UDS. The term Covered denotes a unique delta-neutral instrument created by combining an outright option or options spread with one or more underlying outright futures instruments. A Covered options instrument can have up to 25 futures outright legs and must contain a minimum of one options outright.

When customers request the creation of a covered, CME Globex validates the proposed delta by performing a 'delta reasonability' check. Order quantity is outside of the allowable range'Quantity: Disclosed quantity cannot be smaller than the minimum quantity 'Disclosed: A Covered instrument either expires with the earliest expiration of its component leg instruments or at the end of the trading session.

All listed CME Group outright options and options spreads are available for creating Covered spreads, and all listed outright futures contracts are available as a Covering future. Spaces Browse Space Operations. Electronic Platform Information Console … Enterprise Platform Information Console Trading Services Exchange Traded Instruments on CME Globex Instrument Types Available on CME Globex.

Created by Unknown User elast modified by Confluence Admin on Apr 21, All options spread types are available for all options products on CME Globex with some exceptions, for example: Option Strip Spread GD - energy options only Conditional Curve CC - Eurodollar options only Reduced Tick Inter-Commodity Option Spread EO - natural gas options only.

For any single market, only FS or SA User-Defined Spreads will be recognized. This feature file demonstrates how Covered delta neutrality ies ensured by enforcing a minimum quantity on the Covered. The minimum quantity of the covered order is determined by the future leg delta of covered.

Basic Covered, positive delta, Allocation of Min Qty When the following events occur: Basic Covered, negative delta, Allocation of Min Qty When the following events occur: Basic Covered, Two Futures, positive delta, Allocation of Min Qty When the following events occur: Basic Covered, Two Futures, negative delta, Allocation of Min Qty When the following events occur: Basic Covered, Two Futures bid and ask, Allocation of Min Qty When the following events occur: Basic Covered, more than 2 Futures, Allocation of Min Qty When the following events occur: Basic Covered created, Update in Min Qty configuration, duplicate Covered created and rejected When the following events occur: Update in Min Qty configuration, new Basic Covered UDS created When the following events occur: Otherwise a business reject should be sent back to the client system.

New Limit Order accepted using allocated Min Qty When the following events occur: OrderId ordType price identifier OrderQty modify is rejected because Modified Order Qty id below Delta MinQty Order1 limit Powered by Atlassian Confluence 5.