In a covered option,
A)the strike price is always above the exercise price.
B)the seller owns the underlying asset.
C)the seller does not have an interest in the underlying asset.
D)the option premium never deviates from the intrinsic value.

Question

Quizplus · Accepted Answer

In a covered option, the seller (or writer) of the option owns the underlying asset. This means if the option is exercised, the seller can deliver the asset without needing to purchase it at the current market price, reducing risk.

In a Covered Option