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Finance Dictionary and Glossary of Investment Terms
A transaction involving the purchase of a call option on a stock that has already been shorted. This enables the holder to protect against an increase in the price of the underlying stock. If the stock price decreases, the call is not exercised and the investor profits minus the premium. If the stock price increases, the call is exercised and the investor breaks even minus the premium and short interest.
An investment strategy of short selling a security and entering a long position on its call.