Steps:
- 1. Spread olives on dish towel and roll around to dry. Pulse flour, paprika, pepper, and cayenne in food processor until combined, about 3 pulses. Add cheddar and butter and pulse until mixture resembles coarse crumbs, about 12 pulses. Add egg, water, and Worcestershire and process until dough ball forms, about 20 seconds. 2. Working with 2 teaspoons dough and 1 olive at a time, pat dough into 2-inch circle; place olive in center of dough; form dough around olive; and roll cheddar olive between your hands to make uniform ball. Place cheddar olives on large platter, cover tightly with plastic wrap, and refrigerate for 1 hour or up to 24 hours (or freeze to bake later). 3. Adjust oven racks to upper-middle and lower-middle positions and heat oven to 350 degrees. Line 2 rimmed baking sheets with parchment paper. Space cheddar olives evenly on prepared sheets. Bake until bottoms are well browned and tops are golden, 16 to 18 minutes (if baking from frozen, increase cooking time to about 25 minutes), switching and rotating sheets halfway through baking. Transfer cheddar olives to wire rack and let cool for about 30 minutes before serving.
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