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Efficient image watermarking calls for full exploitation of the perceptual distortion constraint. Second-order statistics of visual stimuli are regarded as critical features for perception. This paper proposes a second-order statistics (SOS)-based image quality metric, which considers the texture masking effect and the contrast sensitivity in Karhunen-Loève transform domain. Compared with the state-of-the-art metrics, the quality prediction by SOS better correlates with several subjectively rated image databases, in which the images are impaired by the typical coding and watermarking artifacts. With the explicit metric definition, spread spectrum watermarking is posed as an optimization problem: we search for a watermark to minimize the distortion of the watermarked image and to maximize the correlation between the watermark pattern and the spread spectrum carrier. The simple metric guarantees the optimal watermark a closed-form solution and a fast implementation. The experiments show that the proposed watermarking scheme can take full advantage of the distortion constraint and improve the robustness in return.