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Covered Combination

Trading Term

An option strategy in which one call and one put with the same expiration but different strike prices are written against each 100 shares of the underlying stock. For example:

  • Write 1 XYZ May 60 call
  • Write 1 XYZ May 55 put
  • Buy 100 shares of XYZ stock

This is not a fully covered strategy because assignment on the short put requires purchase of additional stock.

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