Listen to a Business English Dialogue About Covered writer
Violet: Hi Shawn, have you ever explored covered writing in business and finance?
Shawn: No, Violet, I haven’t. What does it involve?
Violet: Covered writing is when investors sell call options on assets they already own, providing them with a premium income but limiting their potential upside.
Shawn: Ah, I see. So, it’s similar to covered calls, but instead of owning the underlying asset, investors are writing options on assets they don’t own?
Violet: Exactly, Shawn. It’s a strategy used by investors who are neutral or slightly bearish on the underlying asset’s price movement.
Shawn: Interesting. So, covered writers profit from the premium income earned from selling the call options, as long as the asset’s price remains below the strike price.
Violet: Yes, Shawn. However, if the asset’s price rises above the strike price, the covered writer may be obligated to sell the asset at a lower price than the current market value.
Shawn: That makes sense. So, covered writing requires careful consideration of market conditions and risk management.
Violet: Absolutely, Shawn. It’s essential for investors to assess their risk tolerance and investment goals before implementing covered writing strategies.
Shawn: Covered writing seems like a versatile strategy that can provide income in various market conditions.
Violet: Indeed, Shawn. Like any investment strategy, it’s important for investors to understand the potential risks and rewards of covered writing.
Shawn: Overall, covered writing offers investors an opportunity to generate income while managing risk in the financial markets.
Violet: Exactly, Shawn. It’s a strategy that can be tailored to individual investment objectives and market outlooks.