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Covered Call

Option strategy in which you sell a call option against shares you already own. According to many experts, to avoid destroying the capital gains holding period that has already transpired you can sell "qualified covered calls" (explained in detail at the website of Twenty-First Securities). Many companies do not allow employees to sell calls against their company stock, because this could force them to sell shares during a blackout period or to commit other violations of securities law. For details on this and other hedging strategies, see the articles about hedging elsewhere on this website.

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