Covered call is a popular option strategy used to generate income in the form of option premiums.
Investors expect only a slight increase or decrease in the price of the underlying stock over the life of the option when they exercise a covered call.
To exercise a covered call, an investor holding a long position in an asset then writes (sells) call options on the same asset.
Covered call options are often used by those who intend to hold the underlying stock for a long time but do not expect a significant increase in prices in the near future.
This strategy is ideal for investors who believe that the price of the underlying asset will not change much in the near future.
An asset swap is used to convert cash flow characteristics in order to hedge risks from one financial instrument with undesirable cash flow characteristics to another with favorable cash flow characteristics.
The Bank Note Swap Rate (BBSW) is a short-term interest rate used as a benchmark for valuing Australian dollar derivatives and securities, primarily floating rate bonds.
Boundary conditions were used to establish the minimum and maximum possible values of call and put options prior to the introduction of binomial tree and Black-Scholes pricing models.
A call is an option contract that gives the holder the right, but not the obligation, to buy a certain amount of the underlying security at a certain price for a certain time.
A collar is an options strategy that involves buying a put option down and selling a put option up, which is used to protect against large losses but also cap large profits up.