A certificate which is issued by a bank to confirm that a customer, who has written a call option, actually owns, or has a long position in, the stock underlying that call and as such the call is considered covered. In other words, this certificate shows and guarantees that the underlying asset of an option contract is on deposit and available for prospective delivery. In this sense, escrow receipt provides protection to a securities firm carrying a customer’s short option position.
November 19, 2023
