The department was asked by a trust company whether, under New York State Banking Law, it could write covered call options with respect to securities held by it as a trustee.

By writing covered calls the trust company would grant to the call's purchaser an option to buy from it a fixed number of shares at a fixed price within a stated time period usually not exceeding nine months. As consideration for the granting of this option the trust company would receive a premium which would be credited to the particular trust account. The trust company represented to the department that any sale by it of the underlying security during the option period would be preceded or accompanied by the purchase on an option exchange of a call option covering the same securities and expiring at the same time as the original call so as to prevent the trust account from being subject to an uncovered call at any time.

Under the above conditions, the writing of covered call options would be permissible in the department's view provided, however, that no option transactions of this nature would be effected for any account unless previously authorized by the particular account party.

DATED: March 1974