Chapter 02 · Section 2.1

Covered Short Put

We have just seen that one short call is covered if the writer of the call also holds the underlying. In what case is a short put covered?

a) With a long position of the underlying
No. If the price of the underlying decreases you will lose twice with the position, once with the short put and the other with the underlying.
b) With a long call position
c) With a long put position
d) With a short position in the underlying