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Sebi mulls use of covered calls for mutual funds as part of equity strategy

Bullish investors are better off not writing the option and just holding the stock

SEBI
Photo: Reuters

The Securities and Exchange Board of India (Sebi) is looking at the prospect of allowing mutual funds (MFs) to make use of covered calls as part of their equity strategy. Covered calls are an options strategy where an investor holds a long position in an asset and writes (sells) call options (having the right but no obligation to buy) on that same asset to generate an income stream.  This is often employed when an investor has a short-term neutral view on the asset and for this reason holds the asset long and simultaneously has a short position via the option to ...