A transaction that is offset by an opposite but equivalent transaction. – For example, if orange juice futures have been purchased and a call option with the same commodity quantity and tender date is later sold, the market participant’s option position is covered. He owns a futures contract that is deliverable if the option is exercised. – Term for a transaction in which a previously sold contract is repurchased, i.e. a short position is closed out by a long position. – See settlement, short sale, position, open, position, weak, speculation, commodity futures contract, replacement risk.
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