966 Glossary 
Commodities: see Futures Contract. 
Contingent Order: an order whose execution or price is dependent on the align­
ment or price of the underlying security and/or its options. Most commonly it is an 
order to buy stock and sell a covered call option that is given as one order to the 
trading desk of a brokerage firm. Also called a "net order." This is a "not held" 
order. See also Market Not Held Order. 
Conversion Arbitrage: a riskless transaction in which the arbitrageur buys the 
underlying security, buys a put, and sells a call. The options have the same terms. 
See also Reversal Arbitrage. 
Conversion Ratio: see Convertible Security. 
Converted Put: see Synthetic Put. 
Convertible Security: a security that is convertible into another security. Generally, 
a convertible bond or convertible preferred stock is convertible into the underly­
ing stock of the same corporation. The rate at which the shares of the bond or pre­
ferred stock are convertible into the common is called the conversion ratio. 
Cover: to buy back as a closing transaction an option that was initially written, or 
stock that was initially sold short. 
Covered: a written option is considered to be covered if the writer also has an oppos­
ing market position on a share-for-share basis in the underlying security. That is, a 
short call is covered if the underlying stock is owned, and a short put is covered 
(for margin purposes) if the underlying stock is also short in the account. In addi­
tion, a short call is covered if the account is also long another call on the same secu­
rity, with a striking price equal to or less than the striking price of the short call. A 
short put is covered if there is also a long put in the account with a striking price 
equal to or greater than the striking price of the short put. 
Covered Call Write: a strategy in which one writes call options while simultane­
ously owning an equal number of shares of the underlying stock. 
Covered Put Write: a strategy in which one sells put options and simultaneously is 
short an equal number of shares of the underlying security. 
Covered Straddle Write: the term used to describe the strategy in which an 
investor owns the underlying security and also writes a straddle on that security. 
This is not really a covered position. 
Credit: money received in an account. A credit transaction is one in which the net 
sale proceeds are larger than the net buy proceeds ( cost), thereby bringing money 
into the account. See also Debit.