Covered

A trading position is considered to be covered if it is offset by another position. In other words it is a synonym for hedged but usually only in the the context of trading and arbitrage.

The opposite of covered is "uncovered" or "naked".

A covered position is usually much less potentially profitable than a naked one, as the hedge either creates an offsetting loss (e.g. if covered by a future) or a cost (if covered by an option). The usual correlation between risk and return holds!

A perfectly covered position cannot make a profit greater than the risk free rate unless it exploits an arbitrage opportunity, as in Covered interest arbitrage.

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