When a writer holds the underlying security and writes an option on a one-to-one basis with the stock, it is known as writing a covered option. This can be either a short call or a short put, depending on the position of the underlying security in the account. A short call is covered if the underlying security is owned, while a short put is covered if the underlying security is short in the account. Additionally, a short call is covered if a long call of the same underlying security is held in the same account with the same or lower strike price. Similarly, a short put is covered if a long put of the same underlying security is owned in the same account with a strike price equal to or greater than the strike of the short put.
